According to Bank of Ireland (BOI) Irish house prices continued to fall in the first quarter of 2010 on the main published indices, by between 1.3% - 1.6% a month, although this does represent some deceleration in the pace of decline, as prices had fallen by 2% - 2.5% a month in the final quarter of 2009.

BOI sat that the March data has left residential property prices -34% down from the peak on both the permanent tsb / ESRI index and Daft.ie and which are now below the average of the last decade and back to levels last seen in late 2002.

Buyer affordability has improved dramatically in the past eighteen months, with the average new 25-year mortgage costing €1,000 a month to service, against €1,670 two years earlier, and the BOI affordability model shows payments are under 29% of income in 2010 which is now below the average over the last thirty five years. The average rental yield is around 4.3% on the BOI model, which is not far below the 4.5% average recorded since Ireland joined the euro, whilst rents rose in May for the first time in two years according to the Central Statistical Office.

BOI believe that the outlook for the Irish economy has improved and growth may have resumed in the first quarter of this year but that the unemployment rate is still high (if stabilising) and employment falling, so would-be buyers may be waiting for a clearer turnaround in the labour market before entering the property market in larger numbers.

The price and rent trends over the last three years imply excess housing supply but the absence of timely data on transactions makes any estimates tentative. Housing completions have fallen substantially, with 26,400 properties built in 2009 and with some 17,000 likely this year, with the latter adding less than 1% to the housing stock, somewhere around the annual depreciation rate.

The BOI report states that the economic picture in Ireland is brightening of late and a return to economic growth in 2010 is likely to make affordability a more significant factor in the decision by potential buyers whether to rent property or to buy.