HOUSE prices will rise 3.5pc nationally this year but the revival will weaken beyond 2014, global ratings agency Standard and Poor’s (S&P) has said.
The ratings giant said the improvement in the economy and employment, combined with limited supply in Dublin, will help drive a recovery in the housing market this year.
But it said that in the long run, tight credit conditions and mortgage arrears will restrict prices.
It is forecasting price rises will fall back to 2pc on average in 2015.
“We don't expect the housing market revival will stay as strong beyond 2014,” S&P has said.
“Bank lending conditions remain tight and high mortgage arrears will maintain downward pressure on house prices, in our view.
“We therefore forecast that house prices will rise by just 2pc in 2015.”
S&P said house prices in Dublin are now 19.2pc higher than their low point, while prices elsewhere in the country were still experiencing declines as of November last year.
But it said that the improving property market, which is most evident in Dublin, is not evident in the amount of houses being built.
"As of November, the total number of completions stood at 7,425, 3.1pc lower than in the same period of last year,” the S&P report examining Europe’s housing recovery said.
“This is an unprecedented low point. Completions before the housing boom averaged 20,000-25,000 units per year and 70,000 units per year during the boom years.”
The report found that house prices in many European markets may start to stabilise this year amid slowly improving economic conditions.
Yet, a recovery is still a long way off for housing markets worst hit by the downturn outside of Ireland, such as Spain and the Netherlands, amid oversupply and still tight credit conditions, the report said.
Only the UK housing market is staging a strong recovery, while German house prices look set to stay buoyant this year, as their economies are performing better than the European average.