Mortgage deposit rules introduced this year are premature and will stifle the housing market, the Economic and Social Research Institute (ESRI) has said.
The think tank believes the Central Bank measures will hurt the supply of housing and potentially drive up rents.
It also predicted the rules may cause mortgage lending to slump by up to a fifth.
While it agrees with the idea of mortgage deposit rules in principle to cool an overheated market, the ESRI said the timing was wrong.
"We don't think the measures should be there, or certainly not there at this point in time," said Kieran McQuinn, co-author of the ESRI's spring economic commentary, published today.
"In the context of where the market is right now, we're not sure that the measures should have been brought in at this point."
Mr McQuinn said the ESRI welcomed the so-called macro-prudential regulations in theory, but said the issue was with the timing of their application.
A sliding scale of measures that get tougher when the market threatens to over-heat, but eases off when activity is weak would be better, the ESRI believes.
"We still think the market is undervalued. That same analysis [used] in 2006 and 2007 showed that the market was overvalued."
The new rules stipulate borrowings by first-time buyers up to €220,000 will be approved with a deposit of as little as 10pc. But any amount over €220,000 will require a 20pc deposit for that portion of the mortgage. Non first-time buyers will have to come up with a 20pc deposit.
But the ESRI also said first-time buyers should have been treated the same as other borrowers, dismissing the Central Bank's argument that first-time buyers are a less risky proposition for banks.
"A wide number of studies… conclude that when credit conditions are liberalised, it is relatively younger and poorer households who tend to 'benefit' from greater credit provision," the ESRI's commentary said.
The think tank said first-time buyers were more likely to be in negative equity, with more than 79pc who drew down a mortgage between 2005 and 2012 in negative equity.
"Thus, if the purpose of the new regime is to prevent households from experiencing credit-related issues, it is unclear why the conditions should be less binding for first-time buyers," the ESRI said.
And the body predicted that while the measures will result in house prices being lower than they otherwise would, they may also result in fewer houses being built, fewer mortgage loans being issued, and potentially higher rents. But it cautioned against rent control.
It said house prices and housing supply declines of about 4pc to 5pc could occur, and that the impact may take up to four years to be fully realised. Mortgage lending may also fall by between 15pc to 20pc, the think tank said.
Asked what impact the measures may have by the end of the year, Mr McQuinn said: "You'll probably still see increases in prices, and you'll still see some increases in supply, but the increase would probably be greater if you didn't have these."
The ESRI also said prices in Dublin are 38.5pc lower than the 2007 peak.