The price of the average home in Ireland has risen faster than expected to 200,000 euros (about HK$1.8 million). Despite a record number of homes being built, Ireland continues to suffer from a property shortage that will ensure long-term high values, although there could be a market correction in the short term, analysts say. The average price of a second-hand property in Dublin rose by 5.7 per cent during the first quarter, according to Sherry FitzGerald, Ireland's largest estate agent. This brings house-price inflation for the 12 months to March to 19.9 per cent. 'The pace of price inflation was even more robust than anticipated during the opening months of 2003, reflecting the strength of consumer confidence in the performance of the market, the falling interest-rate environment and with the limited supply of second-hand properties available,' said Sherry FitzGerald Group chief economist Marian Finnegan. 'The stock of available second-hand properties is typically more limited in the opening months of the year.' Ms Finnegan said a preliminary analysis revealed that first-time buyer demand had been particularly strong in the first quarter, accounting for a third of second-hand properties traded. Investors were also active, snapping up a fifth of second-hand properties sold. According to Aidan O'Hogan, managing partner of estate agents Hamilton Osborne King, average house prices have broken the 200,000-euro barrier to reach 207,000 euros each. In Dublin, average house prices were 256,000 euros. He said an increase in supply would ease property price rises. Irish developers broke new records in house building last year to push up supply levels, Ireland's latest annual housing statistics bulletin shows. House completions last year were up almost 10 per cent on the previous year, with just over 57,000 properties built. The report says Ireland has the highest rate of house building in Europe, with more houses built in the greater Dublin area last year than ever before. To help first-time buyers and those on low incomes, 20,000 affordable homes and social housing units were built last year. However, this increase in supply has been counterbalanced by greater demand. Ireland's Minister for Housing, Noel Ahern, said on publishing the statistics that the waiting lists had risen along with the number of homes built. Ireland's rising population has exacerbated the housing shortage, according to Michael Ball, visiting professor in real estate and planning at Britain's Reading University and author of the RICS European Housing Review 2003. Plagued by emigration for more than a century, Ireland has become a country of net immigration as Irishmen stay and foreigners come to the country to find work. Ireland's population was 3.9 million last year, according to the official Irish census. This was an 8 per cent increase over 1996, the last time a census was held, and is the highest level seen in Ireland since 1881. Ireland's housing shortage and strong economy put paid to often-repeated warnings of a crash, Professor Ball said. The economic factors underpinning Ireland's buoyant housing market are among the strongest in Europe, centring on a healthy growth rate in gross domestic product of 3.5 per cent last year, low unemployment of 4.4 per cent and low interest rates of 2.5 per cent. GDP had grown by about 10 per cent a year for much of the past decade. Commentators have warned of a property market crash since the late 1990s, on the grounds price rises are unsustainable. But apart from a short-lived dip in the market in the winter of 2001, this doomsday scenario has not materialised. 'There has never been a sustained house price fall,' said Professor Ball. 'The boom since the 1990s really is a new thing. This is why there is considerable uncertainty over the future trajectory of house prices.' However, Professor Ball considers a correction in the Irish property market likely when the government withdraws property tax breaks introduced in 2000, the effect of which depends on how subtlety they are ended. 'The Irish boom will eventually peter out as the country catches up with high productivity countries elsewhere, which will cause the housing market to be far more normal,' he said. 'Tax breaks with regard to housing in Ireland and low property taxes are probably unsustainable in the long run. 'If and when they are removed, there will be house price adjustments. Smart governments do these things over a long period to avoid destabilising markets.' Aside from its tax breaks and lack of regulations, Ireland's property market closely resembled what was happening in the rest of Europe, where there were too many homebuyers seeking too few properties, Professor Ball said. 'The smart investor would be advised to look at the regions of Europe rather than the countries. The Dublin region has not been that different from a number of boom regions in the European Union in terms of house price performance. 'The thing about Ireland is that it is a low regulation country, which is good for investors.' While Ireland's sale market suffers from a shortage of property, the reverse is true in the lettings market. Average rent levels in Dublin fell 4.2 per cent in the 12 months to March, according to the latest Dublin Rental Market Bulletin from property consultancy Gunne Residential. Dublin rents have fallen in response to increased supply and shrinking demand, mainly because there are fewer corporate tenants around during the economic slowdown. Also former tenants have opted to buy because low interest rates have made buying more affordable than renting, according to Gunne Residential.