AS THE house price boom goes from strength to strength, the question on most potential buyers lips is: "Can it last and will I be buying at the top of the market?"

But most industry observers believe the boom will continue over the next couple of years, although the pace at which house prices are rising is likely to slow.

There were signs last week that house prices may already be flattening out. More houses than usual were withdrawn at auction and no bidders turned up for one auction on the Upper Rathmines Road, one of Dublin's most sought after suburbs.

Another house in Killiney, Co Dublin, went for below the auctioneer's guide price. "This is a clear sign we are just starting to see a levelling off," said one auctioneer who asked not to be named.

Alternatively, it could just have been a less spectacular week for the market. Many observers are unwilling to read too much into the results over such a short time.

Since January, house prices in Dublin have risen by up to 15 per cent, with some suburbs experiencing even bigger increases.

The story is similar across much of the country. Prices in Galway city are up by almost 8 per cent while Cork has seen rises of up to 15 per cent, according to local auctioneers.

Limerick and Waterford have seen smaller rises but they are sustainable, nonetheless, at around 10 per cent, says Sherry FitzGerald, in a review of the provincial property market.

Yet individual suburbs and even roads have seen much higher increases. Auctioneers point to the lack of supply in the market as one of the main factors driving the increase. This is the result of a slowdown in home building and the historic lack of period homes.

Mr Mark FitzGerald, of Sherry FitzGerald, says although changing lifestyles mean that two people now tend to buy two apartments rather than one house, only 7,000 new homes will be built this year, compared with 8,500 last year.

"The Government needs to get local authority managers together. They need to be target driven to provide planning and other permission for a certain number of houses," he says.

The other problem in Dublin is that there is a limited supply of fine period homes because very few wealthy families built homes in Ireland in the last century. In addition, the growth of the city is confined by the sea, mountains, the Phoenix Park and the airport on various sides.

Mr FitzGerald also believes the 2,500 people who work in the Dublin Financial Services Centre (IFSC) have helped drive up prices of Victorian and Edwardian houses. "There are only 2,000 period homes in Donnybrook, Sandymount and Ballsbridge, from cottages to embassies," he says. "And most of these people tend to look for period homes."

THE other factor driving the top of the market is the very strong corporate rental sector where the sky is the limit for short term leases. "The market is being pulled from the top and pushed from the bottom," he says.

He predicts areas from Phibsboro to Glasnevin in the north inner city will see the next mini boom. "People who bought into city centre apartments will still want to live close to town as they begin to have children," he says. "So the inner city on the northside, as well as areas around the South Circular, Harold's Cross, Ringsend and Irishtown, are all good value now."

Mr Tom Day, of Lisneys, notes there is a distinct shortage of houses on the northside of Dublin in Sutton, Malahide, Howth and Clontarf. "Northsiders don't move so often, leading to problems," he says.

But what are the risks? According to Ulster Bank economist Mr Eoin Fahy, the only problem he can see on the horizon is a sterling crisis.

But there are other potential problems. Despite house price increases of 15 per cent, pay increases are only up by at most 3 per cent. "You have to ask if a 12 per cent gap is sustainable," says Ms Annette Hughes, economist at DKM Consultants. "The market has to slow down eventually as affordability problems arise for some borrowers.

However, solicitors suggest that much of the money is coming from inheritance. "As people live longer, many people are inheriting from their grandparents as the parents are already comfortably set up," says one Dublin solicitor. "Also, as older couples move out of the family home into smaller accommodation, they often pass their children's inheritance on to them early."

In addition, Ireland is now generally believed to be at the bottom of the interest rate cycle. The only likely way for rates to go is up. With many first time buyers having borrowed up to their limit, even a modest rise in interest rates could hit them hard.

As a result, Mr Fahy warns that people shouldn't get carried away at the historically low repayments and particularly the low rates on offer for the first year.

But he adds that although rates are indeed low, they are likely to stay that way if monetary union proceeds in 1999 as planned. The belief is that Ireland would enjoy the same interest rates as Germany. No firm decisions have been taken on whether monetary union will proceed and it is not even certain if Ireland will be there at the start.

It would be a brave borrower who puts all his hopes in this basket. However, Mr Fahy insists it is unlikely that Irish interest rates will ever rise again to the 15 per cent level they reached in the early 1990s. Instead they will move around the German levels between 4 and 9 per cent.

The other potential problem is that house price rises can easily feed through to higher inflation. Although housing only comprises just over 7 per cent of the consumer price index - compared to fuel at 6 per cent, transport at 14 per cent, food at 26 per cent and drink at 12 per cent - it can have a bigger impact.

THIS is because people are more likely to spend their savings as they see their paper profits rising. As the oil price shock in the 1970s showed, inflation can be affected out of proportion to its so called effect on the index.

The previous governor of the Central Bank, Mr Maurice Doyle, was so worried about this that he increased interest rates from 8 per cent to 12.5 per cent during 1989-90 when he saw the last house price surge. That year, one house on Dartry Road, Dublin 6, increased in value by 47 per cent.

However, Mr Fahy says the present Central Bank governor, Mr Maurice O'Connell, is less worried about house price inflation.

Nevertheless, last week the Central Bank summoned banks and building societies to question them about the housing market. This is a clear sign that it is keeping more than a "close eye" on developments.

Some of the Central Bank's fears centre on the sheer number of first time buyers desperate to get their foot on the first rung of the property ladder. Some commentators privately draw comparisons with the English market just before its collapse in the late 1980s, when borrowers found they had loans greater than the market value of houses which secured them, so called "negative equity".

Economists here stress one of the major problems in Britain was the number of second mortgages used to buy luxury goods, from cars to holidays. "That is not happening to any serious extent here," says Mr Fahy.

Banks and building societies in Britain were very aggressive in their lending policies in the late 1980s. Mortgages covering 100 per cent of the house and sometimes more for renovation were commonplace. Many borrowers were also lent three times their salary, and sometimes more.

Although there have been suggestions here that some banks have been lending 100 per cent on some properties here any evidence so far is anecdotal, according to the banks.

But even if the market has begun to pull back, the auctioneers are still overflowing with confidence.

"Even if it does it will only be temporary," says Mr FitzGerald. "It proved its ability to come back very quickly after both the currency crisis and the Gulf War."