In recent years, the price of property has overtaken the weather as the main staple of Irish conversation.

But the tenor of such talk has changed of late as the rate of house price growth has slowed and properties take longer to sell. The "oohs" and "aahs" that once greeted the latest record house price have been replaced by concerned mutterings from those already on the property ladder and unrestrained relief from those who are not.

Market observers say a number of factors have conspired to rein in the once-runaway property market. The impact of the foot-and-mouth scare, particularly in rural areas, the knock-on effect on tourism, the economic downturn in the US, the consequent jitters in the information technology sector allied to a recent spate of job losses have combined to dent confidence.

This has been reflected in disappointed vendors, high-profile withdrawals from auction and "stickiness" in the market as houses take much longer to sell than in the past.

The figures bear out the anecdotal evidence that the market is slowing.

In the first five months of the year, prices for houses nationally rose by 4.5 per cent compared to 8.5 per cent in the same period last year, according to the State's largest mortgage lender, Irish Permanent.

Its house price index, compiled in association with the Economic and Social Research Institute, also shows a drop in one category of house prices, those of first-time buyers, which fell by 0.3 per cent in May.

Houses are also remaining on the market for longer than in the past. Mr Eunan O'Carroll, head of Gunne's residential division, says houses are now taking six to eight weeks on average to sell compared to two to three weeks two years ago.

But most players in the housing market, from estate agents and mortgage brokers to financial institutions, believe the slowdown from the heady growth rates of the past four to five years is a welcome development and augurs well for the market in the long run.

"What we are seeing is a healthy realignment of the property market after the heyday of the last five to six years," says Mr O'Carroll.

He expects price growth of 8 to 9 per cent this year, down from the 20 per cent figure seen over the past four years. Irish Permanent is also forecasting lower growth of between 8 and 12 per cent, levels that it believes are more sustainable than the bumper growth rate of the recent past, while Hamilton Osborne King expects price rises of about 10 per cent.

The slower rate of price growth has helped to calm the market, so there is less panic buying than was evident in the past. Where once people piled into the market, to get a toehold before it went out of their reach, they can now hold off purchasing until it best suits them and approach the process with more caution.

"Because prices are slowing, there is less of an urgency to buy," says one source in the property industry.

But interestingly, if the pressure on buyers is less, the anxiety has increased for those selling properties.

After growing accustomed to the rapid price growth of recent years, many vendors have unrealistic expectations of what their houses will fetch in a less heady market and face disappointment in what one estate agent describes as "a transition period".

"Frustration in the property market has moved from the purchasing side to the vendor side," says Mr O'Carroll, who notes that the biggest task facing auctioneers and estate agents in the current market is managing vendors' expectations.

While the figures suggest a broadly similar trend in house prices across the State - with the main difference between Dublin and other regions being in terms of absolute prices - there is an emerging disparity between the top end of the market and the middle to lower end.

It seems that houses in the top bracket, priced from £350,000 (€445,000) up, have felt the effects of the slowdown most acutely while the first-time buyer market remains active, helped by the virtual extinction of the residential investor in this sector.

There are several possible explanations for this. Estate agents suggest that vendors at the lower end of the market may be more realistic when setting prices while there has also been a marked increase in supply at the top end of the market, with some observers putting it in the order of 30 per cent for secondhand homes in the Dublin region.

Others suggest that the top end of the market was more sensitive to the economic buoyancy and has therefore been more susceptible to the waning of confidence that has occurred, particularly in the IT sector. "Things have slowed down more quickly at the upper end of the market than in the middle to lower end," says Irish Permanent's head of marketing, Mr Niall O'Grady. "A lot of confidence in the economy was driving it and it was the first to be hit by the slowdown."

Changes in the availability of open-ended bridging finance have also had an impact on this end of the market. "In March and April we saw a logjam where people couldn't buy houses because they couldn't sign contracts because they hadn't sold their own houses," says Ms Clair Cullinan, managing director of Sherry Fitzgerald's residential division.

This situation has started to resolve itself as a growing number of people sell their own house before buying another, but it continues to affect the auction market. Fewer houses are now going to auction and a growing number are being withdrawn with sales often concluded after the auction, providing both buyers and sellers with more freedom to manoeuvre by means of long closing dates.

Long-term, market observers remain optimistic about the outlook for the housing market, believing that there are numerous factors underpinning it.

"The key factors driving the price of houses are the general state of the economy, employment levels, demographics and general interest rate expectations," says Mr O'Grady.

He points out that, despite recent glitches, the economy remains robust, employment continues at record levels while the demographic outlook remains supportive. In addition, the interest rate environment is still relatively benign with most indicators pointing to downward, rather than upward, pressure on euro interest rates.

There have also been concerns of late that the supply situation may not be as healthy as it should be with worries about a slowdown in the rate of housebuilding.

A recent review from the Construction Industry Federation says that new house completions fell by 20 per cent in the private housing sector in the first five months of this year, most notably in the main urban areas. Completions are expected to be down 11 per cent to around 40,000 in the full year. If the number of houses begins to falter, some observers believe it could again create an imbalance in the supply/demand equation with a consequent upward impact on prices.

However, others believe that the slowdown in supply may prove to be just a temporary blip. Even if it does not, it should be countered to some extent by moderating demand.

"There is not the same level of expectation in the market," say one observer. "We should start to see the market coming back toward equilibrium."

jmosullivan@irish-times.ie