According to Fitch Ratings, Ireland’s recession will see gross domestic product (GDP) contract by -7-8% this year and this will force house prices to decline by approximately -45% from the peak of the late 2006 market.

Fitch cited research from the Permanent TSB/Economic and Social Research Institute which showed house price declines have so far fallen -24% from a December 2006 peak.

In a statement, Alastair Bigley, head of Irish RMBS at Fitch, said: ‘Tax rises, high unemployment, wage deflation and property supply overhang continue to undermine the country’s property market.’

Fitch, which cut Ireland’s AAA ratings by one notch to AA-plus in April, said the fall in property prices will be exacerbated by an expected increase in the cost of funding to Irish financial institutions.