The Central Bank has expressed concern about the recent rises in house prices and said there is an increased risk of a sharp correction to the property market.
The bank's Governor John Hurley said the recent rises in house prices did not appear to be consistent with the rest of the economy.
He said growth was concentrated in construction and services, with more modest growth in manufacturing and a disappointing export performance.
Mr Hurley said house prices in recent years had been supported by factors such as demographics, employment and income growth, but this did not seem to be the case with the recent rises.
He said this suggested prices could be overvalued, though the bank still expected a gradual easing of house price growth.
The Minister for Finance, Brian Cowen, has said he noted Mr Hurley's comments.
He said the issue of house price inflation was being tackled by an increase in supply.
Rising risk of hard landing for economy: Cowen
However, he said people also had to be cognisant of the fact that the risks of a hard landing for the economy were increasing even if the Central Bank's view remained that a gradual slowdown was more likely.
The comments came as the Central Bank published its annual report, predicting economic growth of around 5% for this year.
The Central Bank recorded a profits of €122m last year, up from €107m in 2004. It paid a surplus of €109m to the Exchequer.
Mr Hurley said the main driver of growth this year would be domestic demand, helped by employment growth, rising incomes and the maturing of SSIA accounts.
However, he warned that the level of household debt was now very high by international standards, while inflationary pressures were further eroding competitiveness.
He added that Ireland was more dependent on oil than most developed countries, and therefore more at risk from volatility in prices.
He repeated the European Central Bank's warning earlier this month that it would exercise 'strong vigilance' to ensure it kept a lid on inflationary pressures.
Most commentators expect the ECB to raise rates at its next meeting in August.
