The decision by the Central Bank to not change the rules on mortgage lending in the next 12 months could lead to the return of ghost estates, according to the Construction Industry Federation (CIF).
Following a review, Central Bank Governor Gabriel Makhlouf said prices could rise by as much as 25% if the cap on lending is removed.
The rules, which limit the amount most people can borrow to 3.5 times their income, have been criticised by some who say it is a barrier for first time buyers.
CIF said its developers are seeing a slow down in demand due to potential buyers being 'locked out of the market'.
CIF's James BEnson said many couples can't come up with the required deposit under the Central Bank's current rules: "If we look at Greater Dublin Area, you're talking an average house price of €386,000.
"Outside Dublin, into the regions, you're looking at an average house price of €320,000. Teachers or nurses and Gardai- they don't have that combined income throughout Ireland so therefore they're locked out of the market.
Meanwhile, Governor Makhlouf said the lending rules continue to meet their objectives:
"The measures are all about building household and bank resilience.
"An increasing debt is not a response to the problem of housing supply."