House prices will continue to fall as tight credit conditions and uncertainty in the market trigger further declines, a report said today.

Research from Davy Stockbrokers said Irish house prices show no sign of stabilisation, and prices may decline by as much as 70 per cent from peak levels.

Affordability measures indicated they were now approaching sustainable levels, but several factors, including the constraints imposed by banks on credit and a shrinking pool of potential first time buyers, will hold back demand, the report found.

Prices have fallen by an estimated 55 per cent from the peak of the property boom in 2007, Davy said, higher than the official figure of 48 per cent calculated by the Central Statistics Office.

"Because the CSO measure is based on mortgage transactions, it excludes cash purchases and lags developments in the property market by several months," Davy said.

"Reports from estate agents and auction dealers suggest that peak-to-trough declines of close to 60 per cent have already occurred and that cash purchases now account for almost 30 per cent of all transactions. So the CSO measure probably understates the true decline in property prices."

The report noted a sharper decline in Dublin, where prices have declined by 57 per cent compared to 43.5 per cent in other areas.

"However, the lack of transactions in rural areas may mean that the peak-to-trough decline in Dublin is more representative of true market conditions," Davy said.

Earlier this week, Goodbody Stockbrokers estimated that house prices may have fallen by around 60 per cent since the peak, with recent auctions by Allsop Space showing a 68 per cent decline.

However, the Davy report said the auction results may overstate the level of decline, as they represented distressed sales. This was noted by Goodbody, which pointed out the auctions included a relatively small number of properties.