The chief economist of the Central Bank, Gabriel Fagan, has strongly defended the bank's new mortgage lending rules.
In a speech to a property industry conference in Dublin this morning, Mr Fagan said the new rules were designed to deal with "direct financial stability risk" coming from the property market.
He said the Loan to Value and Loan to Income rations are "designed to be a permanent feature of the Irish financial landscape".
He also said it was wrong for the property industry to blame the lending rules for any developments in the market they did not like.
"One regularly reads that adverse developments in the property market are "due to the measures" while less adverse developments are said to occur "despite the measures".
"Such judgments are premature. It is far too early to judge the effectiveness of the measures taken last January," the economist stated.
"First, the measures only came into effect in February and the bulk of new mortgage lending in the first half of the year (some 80% of mortgage drawdowns) was exempt since these loans had been approved prior to the adoption of the measures," he said.
"Second, during the period since the measures were introduced a number of other factors were impacting on the property market - an example is the phasing out of the capital gains tax exemption for property bought between late 2011 and 2014," he added.
"Third, the measures have a medium term orientation and it is difficult to judge success or failure on the basis of very short-term developments in the market," Mr Fagan said.
"In view of these considerations, it will be mid 2016 at the earliest before we can make an initial assessment of the impact and effectiveness of the measures. That said, tentative evidence suggests that the measures have had a positive effect of removing "froth" from property prices, particularly in the Dublin residential market".
Mr Fagan said that while the risks to financial stability from the property market are now significantly lower than in the last decade, there was still a need for strong vigilance by market participants and policymakers.
He said a number of further developments could help to reduce risk, in particular "proposals to increase the role of equity as against debt finance in the property sector, both commercial and residential".
"While the situation looks promising, it is important to avoid falling into the trap of thinking "this time is different", he said.
The economist also reminded the audience at the Sunday Business Post Property Summit that the LTI and LTV measures were introduced to "increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and housing price spirals from developing in the future."
