Construction of new houses surged by 18 per cent in the second quarter of this year, according to new statistics from the Department of the Environment, Heritage and Local Government.

The Department's latest housing statistics bulletin shows that almost 16,000 new houses were built in the three months ending in June, up from 13,440 in the second quarter of 2002.

More than half of these were built in the Dublin area, with Galway accounting for almost 40 per cent of completions.

Analysts said the data supported forecasts of 63,000 completions for the year as a whole.

The bulletin also points to strong growth in demand for mortgages, with a total of €3.2 billion lent to homebuyers in the second quarter. This was 16 per cent ahead of the same months of the previous year, with the value of mortgages advanced for new properties almost 23 per cent higher in 2003 at €1.3 billion.

Mortgages worth slightly more than €1.8 billion were used to pay for second-hand homes.

A breakdown of lending activity shows that banks, including First Active and Permanent TSB, dominate the mortgage market, accounting for 80 per cent of the total value of loans paid in the second quarter.

Slightly more than 40 per cent of all mortgages advanced were based on fixed rates.

The average price paid for a new home over the second quarter was €222,532, up 13 per cent on the same months of 2002. In Dublin, the average price was €289,345. The average second-hand property cost €267,646, up 18 per cent, while in Dublin this rose to €367,314.

Despite the rising prices however, average loan to value ratios remained in line with previous quarters. The average loan to value on a new home was 69 per cent, while on second-hand homes it was 56 per cent.

EBS Building Society said this stability reflected "the wealth gain that the buoyant mortgage market has delivered to many second-time home buyers".

"Despite the continuing yet moderating increases in house prices, consumers are still continuing to buy and build homes," said Mr Dara Deering, head of mortgage sales at EBS.

Merrion Stockbrokers analyst Mr Seamus Murphy said the figures once again confirmed the strength of the housing market. Predicting a "strong out-turn for the year", Mr Murphy said he expected the value of mortgages advanced in 2003 to expand by 22 per cent on an annual basis.