House price inflation nationally have risen 3.7% this year to date and 11.6% since last March, the highest rate of annual inflation for eight years, according to the latest Daft.ie house price report.

Homes listed on the property website during the first three months of the year had an average price of €346,048, which is also 35% higher than prior to the onset of the Covid pandemic.

The current rate of inflation is the second-highest on record in the decade since mortgage market rules were introduced, exceeded only by the 11.7% spike seen in early 2017.

Inflation is being driven primarily by the housing markets in Dublin, where listed prices now average €460,726 and the rest of Leinster, with inflation in the capital now running at an eight-year high of 12.2% and in the rest of the province at 13.4%.

Galway (+13.2% to €409,482) and Limerick (+13.8% to €300,253) cities are also experiencing rates of inflation above the national average, but inflation in Waterford (+11.2% to €260,657) and Cork cities (+9.2% to €358,676) is slower. 

The number of second-hand homes available to buy nationwide stood at less than 9,300 on 1 March, a decline of 17% year-on-year and the lowest total ever recorded by Daft.ie, stretching back to January 2007.

The three months since the start of the year mark the only three months since 2007 where there have been fewer than 10,000 second-hand homes available to buy.

Ronan Lyons, report author and economist at Trinity College Dublin, said the latest surge in house price inflation is due in part to rising interest rates, which had led homeowners to fix their rates over many years with "consequences for liquidity in the second-hand market".

"But while the increase in interest rates has played a role, the underlying issue remains the housing deficit. The mortgage market rules were introduced a decade ago to prevent a repeat of the loose lending that drove Ireland’s Celtic Tiger bubble and crash.

"Nonetheless, prices are up 75% since then, not because of too much credit but because of too few homes," he continued.

"The ultimate solution remains unchanged from that which was needed a decade ago: a lot more homes need to be built, so that the country’s housing is adequate for its households," said Lyons.

"But the entire housing system seems reliant on government funding and subsidies, an unfortunate circumstance at the best of times but of greater concern given wider economic uncertainties.

"Meanwhile, changes in the wider regulatory set-up seems to have delivered confusion, rather than clarity, about how the country will build the homes it needs."