THE Central Bank has issued its starkest warning yet about rising house prices.
In its latest Macro-Financial Review, issued last Monday, the Bank points out that Dublin house prices have been increasing at an annual rate of more than 23pc since August 2014, higher than the peak 22.5pc annual rate of increase recorded in August 2006.
"Large rises in [house] prices can give rise to expectations of further increases and could lead to a misalignment in prices," warned the Central Bank.
This was merely the latest salvo from the Bank on the topic of rising house prices. Last October it published a consultation paper proposing tough new mortgage lending standards.
Under the new standards, which are due to come into force early in the New Year, banks would only be able to lend most homebuyers a maximum of 80pc of the value of a house, ie a minimum 20pc deposit, and 3.5 times their annual income.
After having been strongly criticised for not taking sufficiently firm action during the Celtic Tiger-era house price bubble, the Central Bank is determined not to let history repeat itself.
One would have thought that with a third of all residential mortgages either in arrears and/or having been restructured, its efforts to get it right this time would be widely supported.
Not a bit of it. Its proposals have been strongly attacked by the banks, the property lobby and, most shamefully of all, by many politicians.
Finance Minister Michael Noonan told Newstalk that the proportion of the banks' mortgage lending allowed to 80pc value cap should be 20pc-25pc rather than the 15pc proposed by the Central Bank.
Monday's Macro-Financial Review could well be seen as a two-fingered response to the Minister's comments.
For the Minister for Finance to so publicly disagree with the Central Bank in this way is unprecedented.
So why are the Central Bank and the Minister for Finance airing their dirty linen in public?
Could it possibly be that, having sought to iron out any differences in private, the Central Bank has lost patience with the politicians?
What is still not fully understood is that, under the terms of the 1992 Maastricht Treaty, the Central Bank is entirely independent. Twenty-two years later it would appear that this reality has not yet fully dawned on the Minister.
As a citizen and a taxpayer I strongly hope that Central Bank boss Patrick Honohan will ignore the efforts of the politicians and the usual suspects in the financial services sector to water down the mortgage lending guidelines.
Over the next few weeks we will be treated to a conveyor belt of hard-luck stories about would-be homebuyers allegedly robbed at the last minute of the chance of owning the home of their dreams. Professor Honohan (left) should turn a deaf ear to them all.
What those seeking to undermine the Central Bank's efforts to prevent the emergence of a new house price bubble forget is that, even after the post-2007 collapse, Irish house prices remain very, very expensive when measured as a proportion of incomes.
By combining the CSO house price index, which didn't include average house prices, with the earlier PTSB/ESRI index, which did, we get an average Dublin house or apartment price of €234,000 and €142,600 for the rest of the country.
This compares with average annual public sector incomes of €47,100 and average private sector incomes of €31,500.
In other words, average Dublin house prices are at least five times average public sector incomes and almost seven-and-a-half times average private sector incomes.
Which is of course why the Central Bank is so worried.
Physicist Albert Einstein reputedly defined insanity as doing the same thing over and over again while expecting different outcomes.
Judging by the controversy sparked by the Central Bank's new mortgage rules, many of our politicians and banks appear to think we can do exactly as we did in the mid-2000s and not suffer the consequences.
If that is so then the Irish housing market is already well into Einstein territory.