Experts warn of potential property bubble as prices double in a decade

The pace of rises has also picked up again, with an increase of 7.3pc in the year to March. Prices are now at record nominal highs, having doubled since the low point of a decade ago.

It comes as a mortgage price war has broken out in the market, with PTSB the latest to slash its lending rates. The lender cut some of its mortgage rates by one percentage point – its third cut in recent months.

An acute shortage of second-hand homes in particular is driving up property prices.

Prices are now 9pc higher than the highest level they reached at the peak of the property boom in April 2007.

Economist Austin Hughes said “cheaper money is translating into dearer houses”.

He acknowledged there was now what looked like a boom in property prices.

“But, it is an exclusive boom, as most buyers are being locked out due to affordability issues. It is not the case that everyone is taking part this time.”

Recent figures from the banks show the average deposit needed to buy a home is now €52,500 for a first-time buyer.

“The big difference now is that rising prices are driven by those desperate to get a roof over their heads rather than get rich through property investment with the property market likely to become hotter as an issue in run-up to election,” Mr Hughes said. Regulation on the lending that banks can do was now much tougher than during the Celtic Tiger boom.

Banks now have to set aside a lot of capital when they issue mortgages and are restricted in terms of how much they can lend by rules around customer deposits and loan-to-value limits.

Goodbody Stockbrokers economist Dermot O’Leary said prices had risen for the 10th consecutive month in March.

He said house price inflation rose to its fastest pace in 16 months in March as inflation in the existing home sector accelerated.

The Central Statistics Office (CSO) said prices surged by 7.3pc in the year to March. This is compared to an increase of 6.2pc in the year to February.

Dublin prices increased by 7.2pc in the year to March, and prices outside Dublin are up by 7.4pc.

The region outside of Dublin with the largest rise in house prices was the mid-west – Clare, Limerick and Tipperary – with a jump of 12.3pc in the last year.

At the other end of the scale, the border area of Cavan, Donegal, Leitrim, Monaghan and Sligo had a 2.9pc rise.

Price rises are being fuelled by a severe lack of properties to buy, and by the State’s support schemes for buyers, particularly the Help to Buy scheme and the shared equity First Home scheme, and by mortgage rate cuts.

Prices of second-hand homes are starting to shoot up after being relatively stable compared with new-home prices.

Residential property prices of new dwellings in the first quarter of this year were 8.4pc higher than in the same quarter last year.

Prices of second-hand homes in the first quarter were 5.7pc higher than in the same quarter of last year. This compares with an increase of 1.5pc in the year to the fourth quarter.

Ten successive rises in European Central Bank rates up to last September had caused the housing market to slow down last year as potential buyers grappled with increased borrowing costs.

But the ECB is set to cut its lending rates next month, while lenders are engaged in a mortgage price war.

PTSB has just cut its rates by up to 1.05 percentage points, with cuts in the last month from AIB, EBS, Haven, Avant Money.

Bank of Ireland has introduced a range of discounts on its fixed rates for those with an energy rating of any kind, not just B3 or better.

Robert Gardiner, director of estate agents Auctioneera, said: “While new home commencements are up recently to much fanfare from the Government, the second-hand market is still quite slow in terms of supply.”