A prominent economic research unit has said there will be no "hard landing" for the Irish housing market and that there would be a slowdown in the rate of house price inflation by the autumn.
AIB Global Treasury said the residential property market "was well underpinned by solid demand stemming from demographic and employment related drivers".
In its August Irish Economic Update, the group said: "Output measures of housing activity, such as registration data, continue to show a very strong trend in 2006, pointing to sustained high completion levels in 2007."
While this trend will continue for some time yet, it predicted demand would eventually come more into line with available supply, thus eliminating much of the excess demand in the market.
"This in turn will reduce the risk of a hard landing," it said.
In its report, the group said Ireland's economic performance remains "exceptionally buoyant and resilient" with GDP expected to grow by at least 5.5 per cent this year.
It predicted a similar rate of growth for next year, despite an expected downturn in the global economy and said the outlook beyond 2007 may not be as gloomy as often predicted.
It said several factors including expansionary fiscal policy, the lagged effects of a very low interest rate regime, maturing SSIAs and strong regional in the EU and UK growth, should underpin growth in the short term.
But it warned that inflation would continue to accelerate and that the rise in the Consumer Price Index should average around 4 per cent in 2006, up from 2.5 per cent in 2005. It said much of this is due to higher energy prices and to the rise in interest rates.
It forecast that inflation would fall to 3.6 per cent next year.
In relation to concerns expressed by the IMF about Ireland's over-reliance on construction output, it said: "There is, though, limited value in making comparisons between the share of investment in Irish GDP with that in more infrastructurally developed economies."
"Ireland's infrastructure is not adequately developed in many areas to make us sufficiently competitive in international markets," it said.