The average price of second-hand houses in Dublin increased by 0.4 per cent during the last quarter of 2000, according to estate agents Sherry FitzGerald.

The small increase brought the overall rise for Dublin last year to 16.4 per cent. The agents believe house price inflation in 2001 will average 10 to 15 per cent.

Ms Marian Finnegan, an economist with the agency, said the traditional trend for house inflation was for it to be weighted towards the first half of the year. "This trend was repeated in 2000 when the average price of a second-hand property increased by approximately 14.2 per cent during the period January to June 2000.

Ms Finnegan said the traditional slow down as the year progressed was exaggerated this year by the publication of the third Bacon report in June. "The introduction of penalising rates of tax discouraged a large number of investors from the market."

The extent of the deceleration evident during the latter half of 2000 is unlikely to be sustained, according to Ms Finnegan. The confusion surrounding the implications of the tax changes brought investor demand to an almost complete standstill but she expects some resurgence in investor demand during the first quarter of this year.

Ms Finnegan said she believed the overall pace of inflation was showing definite signs of moderation, something she attributed to increased construction activity, with 10,000 units due for Dublin this year.