Irish property prices have risen by more than any other advanced economy since the end of 2018 and the State is the second most expensive market relative to incomes behind only Switzerland.

A study by the Bank for International Settlements (BIS) published today also showed that the ratio between prices and rents was the third highest behind the Netherlands and Denmark.

"Among the boom/bust/recovery countries, price/income ratios are above trend in Ireland, the Netherlands and Spain, but below in the United Kingdom and the United States," said the Bank, which is the central bank for the world’s central banks.

The BIS report said that property and commercial real estate prices were becoming more closely linked across the world.

"A prolonged low interest rate environment combined with lacklustre economic growth prospects is raising issues of sustainability," the Bank warned.

"As boom and bust patterns in real estate have contributed to the fragility of the financial system in previous crises, there are concerns about the consequences of a potential price correction should fundamentals deteriorate or market sentiments change," it said.

This is the latest warning for global and Irish property markets.

Ireland has seen massive inflows of speculative money into its real estate market in recent years as investment funds have increased their balance sheet more than six-fold since the end of 2008.

They now have €2.6 trillion under management here, a figure that is equal to eight times the size of our economy, a move that has increased the risk of financial market spillovers, especially in the red-hot property market.

Funds now have substantial investments in residential property as well as in commercial real estate.

Lack of affordable housing is a hot button political issue and is credited with helping Sinn Féin to its best ever election result, which has put it in a position to become part of a coalition government.

Sinn Féin has said it wants to freeze rents and build more public housing as well as to empower the Central Bank of Ireland to force banks to cut mortgage interest rates.

The BIS said that in general, the high price to rent ratio seen here meant that it made more economic sense for households to rent.

It also said warned that the high ratio could indicate there was potential for house price declines.

The Central Bank of Ireland has imposed tough loan to value and income rules in order to prevent a re-run of the credit boom that led to the State experiencing one of the biggest economic busts in history.

It calculates that without these controls, property prices would have been 26pc higher by end March 2019.

Online Editors