HOUSE PRICES continued their descent in July, but at a slower pace, falling by an average of 0.2 per cent, according to data from the Permanent TSB/Economic and Social Research Institute house price index.

Average national house prices dropped 9.4 per cent over the 12 months to July, compared to an annual decline of 9.7 per cent recorded over the 12 months to June.

However, analysts held back yesterday from describing the more modest falls in house prices as the beginning of the end of the housing market's troubles.

"Transaction volumes were light during the summer and it's likely that this was a factor in the very low decline in average prices during July," said Niall O'Grady, Permanent TSB's general manager of business strategy.

Goodbody Stockbrokers economist Dermot O'Leary said the 0.2 per cent drop in house prices and a smaller than expected fall in mortgage lending in the second quarter of the year should be described as "less negative" rather than "positive" trends, adding that further declines were likely. "We are reluctant to believe that this is the beginning of a stabilisation of house prices for a number of reasons," he said.

The "significant" amount of unsold homes still on the market was one of the reasons cited.

Based on current transaction trends, the number of houses currently for sale is equivalent to 18 months' supply, according to Goodbody research, with some 55,000 second-hand homes for sale across the State at the end of last week. "We are sticking with our view that prices will fall by 30 per cent from their peak levels."

Since the housing market first began to go into reverse in early 2007, the Permanent TSB/ESRI house price index has recorded a 12 per cent fall in average prices.

During the first seven months of 2008, house prices fell 5.2 per cent, while the average price paid for a house or apartment nationally in July was €272,946.

This compares to an average price of €302,605 in July 2007.

The latest house price index shows that the average price paid for a house in Dublin in July 2008 was €377,316, while the average price paid outside the capital was €235,622. In the commuter counties of Louth, Meath, Kildare and Wicklow, prices fell by 1.2 per cent in July, with the average price for a house in these counties standing at €298,866.

The average price paid by a first-time buyer was €245,539, while the average price paid by a second-time buyer was €305,625.