The cost of living crisis and rising interest rates will dampen demand for houses in the second half of the year, but asking prices have risen nearly 11% over the past 12 months, according to MyHome.ie and Davy.

The median asking price for homes nationally in the second quarter was €320,000, up 10.9% year-on-year and 5.3% from the previous quarter.

In Dublin, the average asking price is now €403,000, an increase of 7.9% from Q2 2021 and 3.4% from the first quarter of the year, while outside of Dublin the average is €270,000, up 12.7% year-on-year and 6.1% quarter-on-quarter.

The report shows evidence that vendors are returning to the market, as the number of available properties for sale rose from 11,200 in March to 12,700 in June.

The average mortgage approval value has risen 9.4% to €283,700 -- above Celtic Tiger levels.

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Excess demand in the market effectively means that 20% of homebuyers with mortgage approval are currently failing to secure a property each year, Davy chief economist Conall MacCoille said.

Increase in the cost of rent outpaced annual inflation in the housing market at 11.2% in the year to May, ensuring rents remain well above pre-pandemic levels.

MacCoille expects house price moderation in the second half of 2022.

"Double-digit inflation and sharp price gains are set to give way to greater concerns on affordability, the economic outlook and the impact of the ECB raising interest rates," MacCoille explained.

He went onto suggest that anecdotal evidence from estate agents suggests that the momentum driving asking price inflation earlier in the year is starting to slow.

"The possibility of a modest fall in Irish house prices can’t be ruled out, correcting some of the froth built-up since the beginning of the pandemic," he added. "However, double-digit declines or a repeat of the Celtic Tiger era housing crash seems very unlikely. This is because the Central Bank of Ireland rules have stopped homebuyers taking on too much debt.”

Joanne Greary, managing director of MyHome.ie, said: "It is encouraging to see stock levels and new listings rise this quarter, albeit from a low base. However, demand is still far outstripping supply and this imbalance needs to be rectified in order for normality to return to the market.”

(Pic: Getty Images)