The price of property in Dublin has continued to accelerate, figures from the Central Statistics Office show.

The latest CSO property price index shows the cost of buying a home in the capital has risen by 12.3% over the past year.

Prices rose by 3.6% nationally in the past 12 months, according to the CSO index.
The figures show the rising cost of property in Dublin is behind the increase in the figures nationally.

The price of residential property in the rest of Ireland, excluding Dublin, was down 2.6% over the past year.

Nationally prices rose by 1.8% last month, but in Dublin the price rise was 3.9%.

The CSO index is based on mortgages draw downs and excludes the purchases by cash buyers.

Today's figures show that in the month of September, Dublin house prices grew by 4.2% and were 12.2% higher than the same time last year.

The price of apartments in the city were up 11% last month.

But despite the recent increase in prices, there have been steep falls since the crash.

House prices in Dublin are 49% lower than at their highest level in early 2007.

Apartments in Dublin are 59% lower than they were in February 2007.

Residential property prices in Dublin are 51% lower than at their highest level in February 2007, while the fall in the price of residential properties in the rest of Ireland is somewhat lower at 48%.

Commenting on today's figures, Merrion economist Alan McQuaid said that the fourth year-on-year rise in residential property prices in a row is very encouraging and is a clear sign that the housing market is recovering after more than five years in the doldrums.

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

The economist also said that while there is no doubt that lack of supply has driven Dublin house prices up, talk of another property bubble is "overdone in our view". 

"It is clear from recent comments from Finance Minister Michael Noonan that the Government is keeping a close eye on developments and will take corrective action if required," he said.

Investec economists said the Dublin property price increases reflect both tight supply and superior economic fundamentals in the city.

They said that as the Irish banks gear up for another round of stress tests over the coming months, they will welcome the improving overall trend in property prices, which has important consequences for provisioning levels.

Davy economist David McNamara said that the "stark" divergence between Dublin and the rest of the country points to a market currently supported by a lack of supply, with an influx of cash buyers compensating for weak mortgage lending.

"Transactions in Dublin were up 17.8% year on year in the third quarter, but the latest mortgage approvals data point to only a modest recovery in lending in the same period following the new year slump. Evidently, cash buyers are attracted by rising rental values, attractive yields and the current perception of property as undervalued," he said.

Looking ahead, he said that the strong double-digit rise in house prices in Dublin should start to moderate as some of the big gains at the tail end of 2012 fall out of the annual comparison. But he cautioned that prices look set to fall further in many oversupplied regions outside Dublin.