House prices are not overvalued here even if they are rising strongly, the Central Bank has said.
Prices have risen by about 50pc since they bottomed out in 2013, but are still 31pc below their peak.
Prices have climbed more than 10pc in the past year alone, sparking fears of another property bubble.
A global economic think tank, the OECD, last week warned that the sharp rise in property prices and lending raises concerns that another bubble may be forming. But Mark Cassidy, head of financial stability at the Central Bank, said prices were not inflated.
"The work that we published at the end of last year, that we will be updating, suggests that house prices are not currently overvalued ... albeit that house price rises are quite strong," Mr Cassidy said.
Deputy Governor Sharon Donnery said the regulator did not believe there was overheating in areas for which the Central Bank has responsibility - such as financial stability and the financial sector.
But she said there was a potential for overheating in other parts of the economy, and warned of the need for a prudent fiscal stance to be taken by the new Taoiseach.
Read more - Housing crisis: Ireland at risk of creating new property bubble - OECD
The bank also said that households remain highly indebted and vulnerable to potential interest rate hikes.
"While household debt has been declining, the sector remains highly indebted, at €143.8bn in 2016 Q4, leaving it vulnerable to a rise in interest rates," Ms Donnery said. "Those in the 30 to 44 age category have high debt-to-income ratios relative to other age cohorts and by international comparison."
Ms Donnery said the overall number of mortgage arrears cases had declined by 44pc since the end of June 2013. She said almost half of mortgage arrears cases were in very long-term arrears.
The bank also warned that while the Government deficit ratio continues to improve, the public debt burden, at around €42,000 per person, remains high by "historical and cross country comparison".
That left the State vulnerable to shocks, Ms Donnery said.
Meanwhile, it seems that new Taoiseach Leo Varadkar is set to clash with the finance ministry on the national debt target.
Mr Varadkar has pledged to ease the debt target, but the department's chief economist yesterday said that he felt the current target was prudent.
Outgoing Finance Minister Michael Noonan last October set the target to cut the debt as a proportion of gross domestic product to 45pc by the mid-2020s, below the EU limit of 60pc. Mr Varadkar has said he would raise that to 55pc to allow for greater capital investment.
"I don't buy into the idea that just because the debt-to-GDP ratio is now down to 75 (pc), that the debt issue is resolved," chief economist John McCarthy said. "I think and the department has said that 45 (pc) is the prudent target."
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