House prices 'sky rocket' by 13% as demand spikes and supply plummets 

The report's author, Ronan Lyons, said: "To put this in context, this rate of inflation is higher than the previous peak of nearly 12% in mid-2017 and is only surpassed by late 2014, the surge of demand before Central Bank rules came in."

The associate economics professor at Trinity College Dublin said the reason for the trend is obvious during the Covid-19 pandemic.

"Housing supply ground to a halt, while housing demand, especially in the first-time buyer cohort,  expanded rather than contracted."

Mr Lyons said construction remains "woefully inadequate compared to the true level of housing need in Ireland" which is likely as high as 50,000 new houses. However, that can’t explain the spike in prices over the last year, he said. 

It is instead the second-hand market that is driving the falloff in supply, Mr Lyons said. Since the start of 2021, listings have been extraordinarily weak, he said. 

"When things were at their worst, in January and February, the number of homes coming on to the market was more than one third lower than the 2015 to 2019 average. But as those are two of the quieter months of the year, the loss was both smaller and more easily reversed, if subsequent activity was at a higher level.

"Instead, these trends continued into the middle of the year. Each of March, April and May were quieter than any of their counterparts in the period 2015 to 2019," he said.

According to a separate MyHome.ie report, in association with Davy, the asking price for an average home rose by 13.6% outside Dublin.

It also shows that average time for a home to go sale agreed has fallen back to a record low of 3.8 months, with houses being snapped up immediately.

The author of the report, Conall MacCoille, chief economist at Davy, said housing market demand is now “red-hot”.

“The news that asking price inflation has returned to double-digit levels will heap even more pressure on the Government to address the housing crisis," he said.

Angela Keegan, managing director of MyHome.ie, said it appears savings generated by homebuying professionals during various lockdowns have helped fuel property price inflation, while also diluting the effect of the Central Bank’s mortgage lending rules.

“Once again, we are seeing the results of the imbalance between sluggish supply and sky-rocketing demand in the property market. Even though we expect property price inflation to dip into single digits by the end of the year, this is a stark warning of the need for increased supply throughout the country," Ms Keegan said.

Sinn Féin housing spokesman Eoin Ó Broin said both reports make for "depressing reading".

"State wide, both reports show average house prices approaching €300,000, while in Dublin, average prices range from €350,000 to €600,000.

‘While the impact of Covid on reducing supply is partly to blame, government actions and inactions are also responsible for the price surge. The expansion of the Help to Buy scheme last summer will have fuelled house price inflation. The proposed Shared Equity Scheme will simply add fuel to the fire in the months ahead," he claimed.

Failure to invest in thousands of affordable houses as recommended by Sinn Féin, the Housing Agency, the National Economic and Social Council, and the Economic and Social Research Institute, has exacerbated the problem, he said.