Davy Stockbrokers has cut its forecasts for housebuilding in 2007 and 2008, and reduced its forecasts for the economy as a whole.

Rossa White, a Davy economist, yesterday said the number of new homes built in the Republic this year would fall by almost 20,000 to 75,000, and to 55,000 in 2008.

On the basis of these estimates, Mr White said the Irish economy would grow by about 4.25 per cent this year, and by between 2.5 per cent and 2.75 per cent in 2008.

Davy had previously pencilled in GNP growth of 4.5 per cent for this year and 3 per cent for 2008.

Reacting to a range of data released this week, Mr White, chief economist with Davy Stockbrokers, said the rate at which new houses were being built in the State was running at half last year's levels in the June to August period.

"We are cutting our housing forecasts due to the recent low run-rate in housing starts and a poor prognosis for the next few months from the industry," he said yesterday. "We now project 75,000 completions for 2007, and 55,000 for 2008."

More than 90,000 new homes were built in the Republic last year. Earlier this year, Davy had predicted that 80,000 new homes would be built in the Republic this year, and 65,000 next year.

However, Mr White said the level of investment in house renovation and repair remained strong, and was helping to offset the decline in housebuilding.

Mr White's analysis reflected figures detailing the number of new homes registered with the building industry's bonding agencies Homebond and Premier Guarantee.

Department of Environment figures show that in the seven months to July these had dropped 35 per cent to 27,567 on the same seven-month period in 2006.

The department's estimates were similar to those of Davy. Its August report on the building industry predicts that 77,000 new houses will be built in the Republic this year, and there will be "considerably less" new home completions in 2008.