No indication that house prices will stop rising

Seeing the words "overvalued" and "property prices" in the same sentence should be enough to strike fear in anyone who experienced the full force of the last financial crisis.

The memory of the post-Celtic Tiger property downturn is still fresh for thousands who struggled through the recession, which was made worse by a banking crash and a collapse in the public finances.

Many people found it difficult to pay mortgages while their work dried up or they had pay cuts and higher taxes.

They weren't able to sell their homes because they had fallen into negative equity.

The numbers in mortgage arrears soared and the crisis became a social, economic and political nightmare.

During the crash, property prices collapsed from 2007 and stopped falling in 2013.

Since then, the cost of buying a house or apartment has risen by 155%. Prices are now 14% above their highest point in the last property boom in April 2007.

Now an analysis from the ESRI has raised the spectre of residential property prices being overvalued once again.

But this time the climate is quite different.

Commentators point out Ireland is not as exposed as it was during the last crash. Banks are subject to much more rigorous supervision. Home buyers are limited in how much they can borrow by tight Central Bank rules and the economy is not as reliant on the property market as it was during the last boom.

Many owner-occupiers have higher levels of equity, so they are less exposed if prices fall.

That said, any warning about property prices being overvalued has to be taken seriously.

The ESRI measured property prices against household disposable income, mortgage rates, the supply of housing and the ratio of the population in the key house purchasing cohort of between 25 and 44 years of age.

It said it was evident that an increasing number of Irish households are facing "elevated" mortgage debts.

This means these borrowers would face difficulties if they lose their jobs or suffer a pay cut. But there is no indication prices are going to stop rising.

The supply of housing is still far below what is needed. The Irish economy is strong, wages are rising and interest rates are falling.

It all means property prices will continue to climb.

And that carries a lot of risks as we know from the past.