A new housing report suggests potential home buyers are now stretched to the largest extent in over a decade, with a standard home purchase costing 7.7 times the average annual income.
The latest house price report from property website MyHome.ie found that the average home sale in the third quarter of 2022 was €370,000, which is 7.7 times the average income of €48,000.
The report said this was the highest multiple since 2009.
Davy Chief Economist Conall Mac Coille, author of the report, said that these stretched valuations could be exacerbated by the Central Bank's decision to ease mortgage lending rules to four times the homebuyers' income.
He said this gave an "upside risk to the 4% house price inflation prediction for next year", adding that "this is a similar valuation multiple to the UK, where house prices are now falling due to a surge in mortgage rates above 6%".
The report, which covers the last three months of 2022, also found that the market is resilient but that annual asking price inflation slowed to 6% nationally during the period when compared with October to December 2021.
Asking price inflation for Dublin was 3.6%, and the figure was 7.6% for the rest of the country outside Dublin.
According to the report, this means the median asking price for a home nationally is now €330,000, while the price in Dublin is €436,000 and elsewhere around the country it is €283,000.
Meanwhile, the report found quarterly asking price inflation dropped by 0.4% nationally, by 0.8% in Dublin, and by 0.2% elsewhere around the country.
However, it notes that asking prices tend to fall towards the end of the year.
MyHome.ie also stated that "the property market has proven to be resilient to a range of external pressures in 2022, but that this resilience is set to be tested next year".
Another finding was that there were 15,000 available properties for sale on MyHome.ie between October and December last year, which is an increase on the same time in 2021 but still below pre-pandemic levels.
Average time to sale agreed in the fourth quarter of 2022 was 2.7 months, which the report said "is indicative of a very tight housing market".
Mr Mac Coille said that "even if mortgage interest rates rise to 4%, debt service ratios are unlikely to become stretched and there will be only a limited headwind to house prices".
He added: "It appeared the market had held up better than anecdotal evidence had suggested in 2022.
"The number of vendors cutting their asking prices is still at low levels. Also, transactions in Q4 were still being settled above asking prices, indicative of a tight market."
Fianna Fáil Senator Mary Fitzpatrick said the Government is doing everything that can be done to provide social and affordable housing.
She said the Government is just one year into the Housing for All plan, and it is not yet a "complete piece of work", but in a year there have been more homes built than in the last decade, more first time buyers than the last five to seven years and more people exiting homelessness.
Speaking on RTÉ's Today with Philip Boucher-Hayes, she said that Housing For All provides unprecedented capital funding and "every available resource is being used" to empower local authorities and housing bodies.
Sinn Féin's Spokesperson on Housing Eoin Ó Broin said that anybody in Government who thinks the plan is working is "living in cloud cuckoo land".
Speaking on the same programme, he said: "Some of the policies that [Minister for Housing] Darragh O'Brien has introduced, such as the controversial shared equity loan scheme, coupled with changes to the Central Bank mortgage lending rules last year, are going to further inflate house prices."
