The Republic is the sixth most exposed country to house price over-evaluation among 16 advanced industrialised nations, according to a new report by London-based rating agency Fitch Ratings.

On the house price front, France is the most exposed country to housing overvaluation, followed by the UK, Denmark and New Zealand, which all exhibit the highest - or the most vulnerable - rankings, reflecting rapid house price growth including relative to incomes and rents, Fitch said.

The US, Spain and, to a lesser extent, the Republic, show lower risk on this front although housing supply dynamics - not captured in Fitch's valuation methods - play an important role in current and prospective house price movements, it said.

In the Republic, Spain and also the US, recent rapid increases in supply increase the risk of a sharp correction in prices, according to Fitch. "For example, in Ireland and Spain the construction sector accounted for 15 per cent and 10 per cent of 2006 value added respectively, and new dwellings are still being produced at rates which exceed new household formation. This can lead to an overhang in inventories, which would put heavy downward pressure on house prices, as was the recent experience in the US," it said.

In relation to household debt vulnerability, the Republic is ranked 11th, while on overall risk - a combination of weakening property prices and rising interest rates - the Republic is placed ninth.

Fitch found that the economies of the UK, Denmark and New Zealand exhibit the greatest macroeconomic vulnerability to a combination of weakening property prices and rising interest rates. Japan, Germany and Italy are the least vulnerable.

The study did not take into account changes in house prices in 2007. "In fact, house price inflation has been easing over the last 12 months in almost all of the advanced economies. The countries where year-on-year growth has slowed the most are Denmark, the US, Spain, France and Ireland."