New house prices have fallen more than 40pc on average from peak 2007 levels, the Irish Home Builders Association said in a report today.

“Reductions of this magnitude and more in many cases have already occurred,” the association, whose members account for 90pc of all homes built in Ireland, said in the report.

“Current prices are not sustainable in the medium and long-run” as they don’t reflect all the costs of building the properties and “a reasonable return” on investment, the association said. Prices may have reached a bottom, according to the report.

House prices, which quadrupled in the decade through 2007, have declined as the economy suffers its worst-ever recession and as banks tighten lending criteria.

Prices for a two-bedroom apartment in the upscale Ballsbridge area of Dublin have been slashed by 42pc to €560,000, according to the report.

The “majority” of developers are now selling properties below cost to generate cash and repay loans, Dominic Doheny, chairman of the group, said at a press conference in Dublin. He said his own company had cut prices on houses in the midlands by 25pc.

The group forecast that 28,000 new homes will be built this year, down from the 2007 peak of about 90,000. It said around 10,000 will be built in 2010.

Bloomberg