Compensating factors mean the slowdown in the housing market will not cause Goodbody Stockbrokers to change its earnings forecasts for the main Irish banks, the firm said yesterday.

However, the AIB-owned firm said the increases or upgrades in earnings forecasts in the course of the year, which have been a feature of recent years with the banks, are less likely to occur in 2007.

Upgrades in previous years have usually been the result of the better than expected business done by the banks' Irish operations. Housing market forecasts are likely to be reduced in the coming period, the firm said.

However, it said an improving dynamic for margins, and strong business lending, indicated that "fundamentally, the large cap banks still look fine and our fair values reasonable".

The firm conducted a survey of 100 mortgage brokers, estate agents and solicitors, to which just more than half responded. Almost a third of respondents said the opening months of 2007 were "significantly worse" than those of 2006, while half of respondents said 2007 was "worse".

First time buyers and investors seemed, in particular, to be less active in the market, the survey indicated. A survey of 100 investors, which elicited 63 responses, found that almost 90 per cent had no intention of selling in the coming year. However, 78 per cent did not intend to add to their Irish investment portfolio in the coming year.

The slowdown in activity and prices over the past nine months was due in part, Goodbody said, to speculation regarding changes to the stamp duty regime.

The weakening of the market has obvious implications for the Irish banks. However Anglo Irish Bank was less exposed to Irish, as against global property trends, Goodbody said.

For AIB and Bank of Ireland, other factors in the Irish banking market provided comfort - "however sentiment issues in the short term are clearly hard to ignore".

The firm said its strategy of Anglo over AIB over Bank of Ireland over Irish Life & Permanent, in terms of preference, remained in place.