The Republic's mortgage market will be one of the two fastest-growing in Europe over the next four years, according to a new analysis from Citigroup.

The bank expects that the Irish mortgage market to post double-digit compound growth between now and 2009, with Greece the only other EU state to expand at a similar rate.

For this reason, it says banks with a good exposure to mortgages in Greece and the Republic would make good stock bets. It favours AIB in the Irish market, while in Greece, it rates NBG.

In France, another mortgage market forecast to post good growth, Citigroup highlights the potential of SocGen and Credit Agricole.

Citigroup says Irish demand for mortgages will be driven by demographics rather than by price rises, as in Greece. The bank is expecting compound annual growth of 2 per cent in the Republic's population over the coming four years, and growth of 3 per cent in dwelling numbers.

"Note that this growth is despite an already high owner-occupation level," says Citigroup.

The bank also points out that the Republic has the second lowest average loan to value ratio after Italy, suggesting that scope exists for people to extract equity from their properties by raising their mortgage exposure.

Citigroup judges that Europe's mortgage market has growth from €1.5 trillion 15 years ago to €4.4 trillion today. The bank forecasts that it will become a €6 trillion market by 2009.

While the market is forecast to grow rapidly in France, Greece and the Republic, expansion is expected to be considerably weaker in Germany and the Netherlands.

Dutch loan to value ratios are the highest in Europe, with the average mortgage representing 90 per cent of a property's value.

Citigroup also points out that property prices are already at six times average earnings in the Netherlands, thus leaving limited space for price growth.

In Germany, prices are at five times average income and wage growth is running at low levels.