Capital boom fuels house price rise
Demand for homes in Dublin has driven up property prices nationwide for the fourth month running, figures show.
A report on the property market found prices in the capital soared by 8% in the last year causing national prices to go up 2.3% since July 2012.
However a breakdown of the figures by the Central Statistics Office (CSO) revealed a greater gap outside the capital, where prices dropped by 0.1% last month and are 1.5% lower than a year ago.
David McNamara, an economist at Davy Stockbrokers, warned the numbers look too good to be true.
"Prices in Dublin were up a massive 3.3% on the month, the single largest monthly rise since 2005," he said.
"Volatility of this nature in the mortgage-based index is likely given the paltry number of mortgages drawn down this year.
"So some of today's striking gains may be unwound later.
"Nevertheless, the trend in Dublin is one of growth, underpinned by a shortage of supply in many areas, while prices outside the capital continue to slide."
Figures show national property prices increased for a fourth consecutive month in July, rising 1.2% month-on month.
The index also recorded its second annual increase in national prices since January 2008.
However Mr McNamara said the divergence between the Dublin market and the rest of the country is striking.
House prices in the city grew to 3.6% in July and were 7.5% up from a year earlier, while apartment prices recorded a rise of 11.6% from July 2012.
But the CSO revealed data on apartments were based on low volumes of transactions and consequently suffer from greater volatility, or variation.
Mr McNamara also warned the entire index is drawn from a small pool of mortgages meaning the potential for volatility is high.
He maintained just 791 million euro of new mortgages were issued in the first half of the year, 50% below that of the second half of 2012.
Cash buyers also account for half of the market.
Mr McNamara said just 4,660 mortgages were drawn down in the first half of the year, a 7.7% fall in volumes from the same time last year.
"In 2012, the 14,160 new mortgages issued meaning just 0.7% of the country's housing stock was transacted through mortgage lending and captured in the index," he added.
"At peak between 2005 and 2006, the annual turnover of the housing stock through mortgage lending was 6%."
The CSO said the overall decline in the price of a home in the rest of Ireland is 48% down since the height of the boom in early 2007.
House prices in Dublin remain 52% lower than at their highest level, while apartments in the capital have dropped 59%, it added.