Consumers are no longer worried about a property market crash and believe there will be a "soft landing", with house price inflation slowing to more modest levels, a new report suggests.

A study by the Economic and Social Research Institute (ESRI) and IIB Bank found that signs of a clear improvement in the Irish economy and a better outlook for employment had largely allayed concerns about an imminent collapse in the property market.

It notes that most people now expect house prices to rise by 5.5 per cent each year, broadly in line with the expected increase in income levels in the economy, and well shy of the current 13.4 per cent rate of house price inflation.

Discussing the findings yesterday, IIB economist Mr Austin Hughes said the report suggested a "healthy and balanced property market for the next year".

In August 2003, an earlier study reported that 2 per cent of consumers interviewed believed that house prices would decline sharply. When the research was repeated last month, this figure had declined to 0.6 of a percentage point.

"Worries about a price fall have almost evaporated," Mr Hughes said.

The ESRI/IIB study also suggests that there is no reason to be alarmed about Irish consumers' level of mortgage debt.

The average mortgage accounts for about 73 per cent of the total purchase price and, in a low interest rate environment, consumers are comfortable that their debt burdens are "manageable", the report says.

The share of consumers anticipating price increases of more than 15 per cent dropped to 9 per cent from 11 per cent of respondents. In general, IIB and the ESRI believe that this suggests there are fewer extreme views on the outlook for Irish house prices at either end of the spectrum.

Some 24 per cent of respondents suggested that economic trends were the key driver of the property market, with a further 20 per cent citing population growth.

The report concludes that the level of confidence in the housing market has increased.

It suggests that, while there are substantial variations in borrowing among consumers, expectations about lower house price rises, less concern about affordability and historic evidence provide comfort that the market can remain stable.