Ireland is at risk of "another devastating housing market crash", a former deputy governor of the Central Bank has warned.
"After having endured the collapse of its housing market less than a decade ago, Ireland has lately been experiencing a blistering recovery in prices, which already have risen in Dublin by some 50pc from the trough in 2010," says Stefan Gerlach. "Is Ireland setting itself up for another devastating crash?"
Mr Gerlach, who stepped down as a Central Bank director to become chief economist at BSI Bank in Zurich last January, fears that Ireland's banking regulator is coming under undue pressure to relax lending rules.
His views are contained in an article, 'The return of Ireland's housing bubble' for the global think-tank Project Syndicate'.
He blames the construction industry and politicians who have "jumped on the bandwagon".
"In January 2015, the Central Bank sought to protect financial institutions from another catastrophic bubble by restricting their lending to high-risk borrowers.
"As a result, annual growth in property prices fell from a little over 20pc to just below 5pc," Mr Gerlach said.
"But the construction industry, worried about its profits, has been harshly critical of the rules, as have ordinary people who have been denied credit, and thus must struggle to find suitable housing in a small rental market. Politicians, no surprise, have jumped on the bandwagon, to capitalise on the popular mood.
"As the pressure on Irish regulators to relax lending rules intensifies, so do concerns that they will succumb to it. One hopes that they will continue to resist. Would-be borrowers do indeed face genuine challenges as a result of these regulations; but that is nothing compared to the pain that a collapsing bubble would cause," he said.
Reflecting on his years at the bank, Mr Gerlach - deputy governor from 2011-2015 - said: "It's no secret that the collapse of asset bubbles carries massive financial and social costs.
"With construction activity and investment spending grinding to a halt, sharp recessions - which cause tax revenues to fall, even as surging unemployment demands increased social spending - are unavoidable.
"Taxpayers may even be asked to shore up financial institutions' capital base. The last time that happened in Ireland, it cost more than €60bn, or about 40pc of GDP."
"The obvious question is why nobody stepped in before it was too late. The answer is simple: while the bubbles are inflating, many people benefit. With the construction sector thriving, unemployment falling, and banks lending freely, people are happy - and politicians like it that way."
In a damning analysis of property bubbles such as the one that hit Ireland in 2008, he says: "The process is simple. Rising prices trigger a surge in building activity, which creates job opportunities for young, low-skill workers, whose employment options are otherwise limited, and generates large profits for property developers and builders.
"Banks' profits rise too, because there is plenty of demand for mortgage lending, which is viewed as almost risk-free. After all, steadily rising property prices mean that, if a borrower defaults, the property can be resold at a profit. (The inevitable market correction remains too remote to be taken seriously at the height of the boom.)
"Taking advantage of this lending, ordinary people, from taxi drivers to hairdressers, can become millionaires by playing the market on the side.
"All of this benefits elected leaders, who win the support of voters who feel wealthier, the formerly unemployed who find jobs, and the homeowners whose houses are rising in value.
"Endearing politicians to voters further are new spending increases and tax cuts that can be undertaken, as accelerating economic growth causes the debt-to-GDP ratio to fall."