* Prices outside Dublin grow at fastest pace in 7 years
* 5 pct growth still lags 23 pct growth in capital
* Leading building merchant sees growth spreading (Adds details of rises, comment from Grafton CEO)
By Conor Humphries
DUBLIN, Aug 27 (Reuters) - Irish house prices outside Dublin rose at their fastest rate in seven years in the year to July, in a sign the market recovery is starting to move beyond the capital, data showed on Wednesday.
Prices in Dublin have surged by 23 percent in the past year, leading the central bank to warn that a protracted delay in addressing housing shortages could put prices on an unsustainable path, but prices in the rest of the country have lagged.
Ireland’s economy is still recovering from a devastating 2008 property crash and the resulting banking crisis that forced it into an EU/IMF bailout, though the economy appears to be rebounding with growth of 2.7 percent in the first quarter.
Residential property prices outside of Dublin rose 5 percent in the year to July, up from 3 percent in June and 1.8 percent in May, leaving prices 43 percent below their 2007 peak, the Central Statistics Office said.
The government has said it will soon announce a series of measures to boost house building to ease pressure on prices. State-owned property agency NAMA has said it plans to invest 1.5 billion euros to develop housing in Dublin.
Building supplies group Grafton, which earlier on Wednesday said Irish sales helped lift its underlying operating profit by 62 percent compared to a year ago, reported signs that building activity was starting to move beyond the capital.
“We saw the recovery starting in Dublin, but it is really starting to permeate across the country now ... probably with the exception of the midlands,” Chief Executive Gavin Slark told Reuters.
“What you are probably seeing is the result of many years of nothing being built, so demand is tightening up, particularly in terms of family houses,” he said. (Reporting by Conor Humphries, editing by John Stonestreet and Susan Fenton)