Government officials played down a report in the Economist magazine that predicted a crash in the Irish housing market, it has emerged.
While the Economist warned that house prices would fall by up to 20 per cent in the next four years, officials in the Department of the Environment said many other commentaries suggested a "soft landing" in the market.
The officials made their remarks in a note for the Minister of State for the Environment, Mr Noel Ahern, on May 30th.
In a widely publicised report the previous day, the Economist advised prospective buyers to rent property in anticipation of lower prices.
The report was criticised by property and banking interests in Dublin.
Released under the Freedom of Information Act, the advice to Mr Ahern said that Ireland was listed as one of six states "in which the research predicts (or 'guesses') that house prices will drop".
The others were the US, Britain, Spain, the Netherlands and Australia.
While outlining the conclusions of the report in the Economist, the officials said that "various articles from leading Irish economists and institutions have counteracted the speculation of housing market busts".
The officials cited research by the Central Bank, the Bank of Ireland, Goodbody Stockbrokers and the Irish Auctioneers' and Valuers' Institute.
They said there were "many different views on whether there will be a bust in housing markets".
Noting that the "hysteria" reported in the market in the late 1990s had calmed, they said: "The ultimate objective is for a soft landing rather than a crash, and the recent data and commentaries are pointing to that for the year ahead."
They said that prices were moderating because "high demand is beginning to be matched by supply.
"Commentators are now forecasting low to moderate increases (probably in line with inflation) in house prices for this year."
In speaking points prepared for Mr Ahern, officials said: "We are now seeing the positive results of Government measures through substantial increases in housing output".
This was a key aim of Government policy, which is designed to foster house-price increases at the rate of inflation.
However, the latest figures show that prices have continued to rise significantly in excess of inflation.
The most recent study by the Economic and Social Research Institute and Permanent TSB shows that the cost of housing rose by 15.6 per cent year-on-year in July.
Responding to the continued strong growth in the market, the Central Bank has renewed warnings to banks and building societies on their lending criteria.
The official advice to Mr Ahern was made some weeks before the International Monetary Fund warned of a significant risk that house prices were overvalued.
