Property prices are likely to rise further in the year ahead as demand continues to outstrip supply, according to estate agency Sherry Fitzgerald.

Last year saw national property prices rise by 16.3%, according to the firm, with much of that growth coming from the Dublin market.

A lack of supply was a major factor in this growth and the company does not see this issue being resolved in the short-term, especially as demand increases on the back of an economic recovery.

The Central Bank’s proposals on mortgage lending could have an impact on this, it said, though as the rules are yet to be finalised it is difficult to know the extent of this.

Changes in mortgage rules could also have a knock-on effect on the rental market, the company said, as it may force potential first-time buyers to rent for longer as they add to their savings.

The reduction in the amount of buy-to-let stock on the market could also push up rents, it said, which have already risen sharply in the past twelve months.

“The medium term outlook for the market is more difficult to predict, it will be some time before the mismatch between demand and supply is rectified and as such some time before the market truly stabilises,” the estate agency said. 

“In the interim, there is likely to be some volatility with above trend price and indeed rental inflation in urban centres.”