The increase in property prices as the market recovers after the crash presents a new risk to the State, a Government report warns.

An official examination of threats facing Ireland has also set out risks linked to expectations of tax cuts and greater public expenditure, as well as from increased uncertainty over the UK’s relationship with the EU.

The draft national risk assessment report, published by Taoiseach Enda Kenny, marks an effort to identify financial and non-financial risks so prevention and mitigation measures can be introduced.

“We must do this by being open to the future, scanning the horizon to ensure that we are quick to detect any event that could undo us if left unchecked,” Mr Kenny said.

Noting that national house prices rose 13 per cent last year and that Dublin prices rose 22 per cent, the report said “misalignments” in the property market present a stand-alone risk.

The price rise was attributed to a mismatch between housing supply and the formation of 187,000 new households since 2006.

The report recognised that property price increases could lead to a greater supply of homes for sale and reductions in the level of negative equity. However, it said rising prices posed a number of social and economic challenges.

“They reduce the affordability of accommodation, negatively affect individuals’ mobility and harm national economic competitiveness. Rising prices make home ownership more difficult but they may also drive up rents as well as increase homelessness,” the report said.

“An important side effect is that a lack of housing and associated high prices and rental costs could affect Ireland’s attractiveness for inward investments and skilled immigrants.”

The report said new Central Bank mortgage caps were designed to boost resilience to shocks and reduce the risk of bank credit and house price spirals.

Of the public finances, the report said there may be tension between European spending constraints and pressures arising from the expansion of the population, investment needs and “public demands both for increased services and cuts in income taxes beyond what may be sustainable”.

With a British EU referendum on the horizon, the report said a fundamental change to the role of Britain in Europe or a period of continuing uncertainty over its relationship with the EU “could present significant challenges for the EU as a whole and for Ireland in particular”.