The rate at which Dublin house prices are increasing is slowing sharply, according to unpublished Government figures.

Figures for the three months to last December, which will be published shortly in the Housing Bulletin for 1998, will show that the annual rate of increase in house prices in Dublin has fallen to its lowest level since the third quarter of 1997.

During the third quarter of 1997, new house prices in Dublin rose at an annual rate of 22.7 per cent and second-hand prices by 24.3 per cent. The 1998 annual figures will show a lower rate of annual increase during the fourth quarter of last year, representing a sharp slowdown from the 32.4 per cent increase in new house prices and the 41.7 per cent in second hand prices recorded at the end of the third quarter of 1998.

An indication of the new figures came in a Government response to the NCB report on housing. The basic conclusion of the NCB Stockbrokers report was that there is little risk of a boom/bust scenario in the market, or of over-borrowing and negative equity, said the Minister for the Environment and Local Government, Mr Dempsey, and the Minister of State, Mr Bobby Molloy, said in a statement yesterday. They welcomed this analysis, but urged "prudence" on the part of borrowers and lenders alike.

However, they questioned the suggestion in the report that there was no evidence of the rate of house price increase decelerating.

"Published and unpublished price data indicate otherwise," the ministers said in a statement. "New house prices in Dublin rose by 2.2 per cent in the September quarter of 1998, compared with 10.6 per cent in the June quarter," while the yet to be published figures show house price increases in Dublin "lower than at any time since the third quarter of 1997".

They also rejected the idea that tax measures taken by the Government to dampen the market had been ineffective.

"Lending institutions and auctioneers report that the removal of investor incentives had the intended effect of relieving serious short term overheating in the housing market," said Mr Dempsey and Mr Molloy.

Addressing concerns about rented accommodation, the ministers said the Government had correctly predicted that investment in the apartment sector would continue, despite the removal of fiscal incentives.

They also criticised the report for asserting that only 1,500 serviced sites were likely to become available in the Dublin region in 1999.

"Sufficient land for 11,000 housing units will be serviced in the greater Dublin region this year, with a further 27,000 sites in the rest of the country," the ministers said.