A new report has said people are increasingly finding that they are unable to buy homes.

However, the AIB's Economic Research Unit says the supply of housing is increasing and that the rate at which house prices are increasing is moderating.

AIB, which is one of Ireland's biggest mortgage providers, predicts that average house price increases during next year will be between 3% and 6%.

This is the latest report on the housing sector assuring current and prospective home buyers of a soft landing in the market, supported by economic and population growth.

AIB says its overall outlook for the next two years is quite optimistic, with an expected 93,000 new homes built this year, falling to 78,000 in 2008 as housing supply catches up with demand.

And it says the risk of a property crash, which would be bad for the wider economy, remains low despite opinion from some domestic and international observers to the contrary.

But the reports says top-end properties in Dublin may have become too expensive, with buyers refusing to pay the asked prices.

It also says that potential buyers may not be too comforted by forecasts that Europe's desire to increase interest rates will end any time soon.

In the meantime, the housing market has become increasingly political.

This morning on RTÉ Radio, Fine Gael's finance spokesperson, Richard Bruton, said his party is in favour of reducing stamp duty on houses if elected next year.

His comments follow those from PD leader Michael McDowell, who recently said the Government did not need the tax income earned from stamp duty.

In his commentary though, AIB chief economist John Beggs describes stamp duty rates as punitive but warns that easing the burden at this stage would go straight into higher house prices.