Annual house price inflation accelerated to 5.5 per cent in May, the fastest level of growth seen in 2½ years.
This was up from 4.6 per cent the previous month and from -0.5 per cent as recently as October.
The latest official figures from the Central Statistics Office (CSO) show the State's property market is continuing to be fuelled by the pandemic-related factors, such as increased savings and lower supply.
Prices in Dublin rose by 4.9 per cent on an annual basis in May, the fastest level of growth seen in the capital since late 2018, while prices outside Dublin rose 6.2 per cent.
Many had predicted property values would decline as a result of the pandemic but a number of factors – increased savings, home working and ex-pats returning from London after Brexit – have led to an acceleration prices.
The hiatus in construction during the first four months of 2021 has also curtailed supply, putting further pressure on prices.
Commercial property websites such as Daft and MyHome have detected an even sharper level of inflation - last month they estimated prices had risen by 13 per cent in the past 12 months - but their statistics are based on asking prices whereas the CSO’s Residential Property Price Index is based on actual transactions.
The CSO said the number of property transactions in May rose month on month by 2.2 per cent to 3,207. The total value of transactions filed with Revenue in May was €984 million.
Existing dwellings accounted for 84 per cent of the homes purchased, while the balance of 15.6 per cent were new dwellings.
The figures show households paid a median or middle-range price of €265,000 for a home in the Republic over the past year. The Dublin region had the highest median price at €392,500.
The CSO’s index suggests prices nationally are 13.5 per cent lower than its highest level in 2007 while Dublin prices are 18.8 per cent lower than their February 2007 peak.
“With strong momentum in monthly changes at present, the annual rate of increase in Irish house prices could continue to move higher through the summer,” KBC Bank Ireland chief economist Austin Hughes said.
Ahead of the release of the Government’s Summer Economic Statement, which is expected to have significant policy measures on housing, Mr Hughes said there were “four distinct drivers” of house prices at present.
A global trend towards rising asset prices and “hot” house prices, predicated on low borrowing costs and a generally positive economic outlook; a positive outlook for the Irish economy; a blockage in supply; and a “bubble in demand” fuelled by an inadequate level of activity through the past decade.