Friends First economist Jim Power has said 2006 was the year the housing market reached its peak, adding that the days of double-digit annual price inflation are behind us for now.
Speaking at the launch of his quarterly economic report, however, the economist said reports of the death of the housing market were greatly exaggerated.
He said the current gradual slowdown was welcome and suggested greater sustainability in the longer term.
On interest rates, Mr Power said the ECB's key rate was headed for 4.25% by the end of 2007. He said two increases looked certain, while a third had become a 'distinct possibility'.
The economist said recent announcements of job losses should not come as a surprise, as a loss of cost competitiveness had left Ireland 'very exposed'. He said a low corporation tax rate was no longer enough to guarantee future jobs success.
Mr Power said the issue of state services was crucial, and the second benchmarking report on public sector pay should not contribute further to costs.
The economist predicted GDP growth of 5.4% this year, with an average inflation rate of 3.8%. He said the falling US housing market was the main risk to global economic growth.
