Figures from the Central Statistics Office show residential property prices nationwide grew by 2.8% in the year to August - the fastest pace of growth in six years.

This compares with a fall of 11.8% in the 12 months from August 2011 to August 2012.

In the month of August, residential property prices increased by 0.9% compared to an increase of 1.2% in July.

The CSO said that Dublin residential property prices grew by 1.9% in August to stand 10.6% higher than a year ago.

Dublin house prices were up 2.1% in the month, while they grew by 10.5% compared to August of last year.

Dublin apartment prices rose by 10.2% in the year, although the CSO noted the low volumes of transactions, which means that these sales experience greater volatility than others.

The price of homes outside of Dublin rose by 0.1% in August, compared with an increase of 1.3% in August of last year. Prices were 2.6% lower than in August 2012, the CSO noted.

Today's figures reveal that house prices in Dublin are 51% lower than at their highest level in the early part of 2007, while Dublin apartment prices are 59% lower than in February 2007.

Property prices in Dublin are 53% lower than their peak in 2007, while the fall in the price of homes in the rest of Ireland is somewhat lower at 48%.

Merrion economist Alan McQuaid said today's CSO figures show that the recovery in the housing market is being mainly driven by developments in Dublin city.

He said that while there is clearly an urban/rural divide, it would be more worrying if the trend was the other way around given that the greatest mass of people live or work in the Dublin area and the general surrounds.

Davy economist Conall Mac Coille also said that prices in Dublin have been supported by a lack of supply - accentuated by the lack of repossessions associated with delinquent mortgage loans.

"The presence of cash buyers - attracted by rising rental values, attractive yields and a perception that residential property is currently undervalued - has compensated for weak mortgage lending," he added.

Philip O'Sullivan, chief economist at Investec, said the headline 2.8% annual rise in house prices nationwide masks a "two-tier" Irish residential property market, with Dublin’s performance leaving the rest of the country in the shade.

He noted that Dublin prices have now posted year-on-year gains in every month this year, adding that there was no evidence the two-tier market will dissipate in the foreseeable future.