A report published this morning suggests that the phenomenal pace of house building in recent years has contributed to a broad equilibrium in the market.
Bank of Ireland's quarterly Irish Property Review says this will mean only 5% growth in the price of second hand houses this year, with little or no increase in new house prices.
But the report says the residential property market will remain buoyant, with mortgage lending topping the €12.5 billion mark, an increase of 20% on 2002's record level.
Bank of Ireland economist Dan McLaughlin said housing supply rose by 4.2%, or 57,000 houses, in 2002, with a further 60,000 completions expected this year.
He said the signs indicated that the perceived crisis in the housing sector has abated. 'The increase in supply demonstrates that the market system is functioning effectively and argues for a non-interventionist approach to the property market,' McLaughlin added.
He also said that more intense competition would mean builders would be unlikely to pass on the 1% rise in VAT announced in the budget.
But the Bank of Ireland review found that affordability - the cost of servicing a mortgage relative to income - deteriorated slightly in 2002 to 24.3% of income, compared with 24% in 2001. This was brought about by a rise in mortgage value and slower wage growth.
