The pace of growth in house prices slowed to 0.5 per cent in May, according to the latest edition of the Permanent TSB House Price Index. The figure compares to a 2.9 per cent increase in the index in April, the largest in almost four years.

Permanent TSB general manager of marketing Mr Niall O'Grady said it was too early to explain definitively the sharp moderation in monthly growth, but suggested that the first few months of 2002 may have seen an "artificial short-term boost" in demand from first-time buyers and investors.

First-time buyers who had been "sitting on their hands" in the hope of falling house prices had been forced back into the market on the back of pro-investor measures contained within last December's Budget, Mr O'Grady said, with investors also displaying significant "pent-up demand".

However, some house prices were shown to fall during May. New house prices, for example, showed a fall of 0.6 per cent during the month while, outside Dublin, prices were static.

Mr David Duffy of the Economic and Social Research Institute, who compiled the statistics included in the index, cautioned against over-interpretation of one month's numbers, arguing that they simply represented "a picture in time" rather than a trend.

The index also shows that prices within Dublin rose by 1.7 per cent in May, compared to 2 per cent in the previous month. The average price paid for a house in Dublin last month was €245,840, while buyers outside Dublin paid an average of €169,093.

First-time buyers paid 1.2 per cent more in May than in April, while second-time buyers saw no increase in prices, despite experiencing a 3.4 per cent growth in April. The average price paid by a first-time buyer in May was €168,435, while the average second-time buyer paid €213,716.

As for the broader picture, the index shows that annual increases in house prices continued to rise over the month, with prices growing by 5 per cent in the 12 months to May.