House prices fell for the seventh month in a row in September and have now dropped by 3.6 per cent since the start of the year, according to the latest edition of the Permanent TSB/ESRI house price index. Laura Slatteryreports.

But Permanent TSB said there was anecdotal evidence that the prices of new homes were being propped up by developers.

The bank's head of marketing, Niall O'Grady, said the September price fall - which saw the average price paid for a property drop below the €300,000 mark - confirmed the trend of "a modest decline" in the property market, but he said there were "inconsistencies" across the market.

"For example, there were modest increases in three-bedroom semi-detached properties and no change in the price of new homes," he said.

Mr O'Grady said developers could be supporting prices by including a higher level of add-ons in their fit-outs in order to improve the value to potential buyers. In times of high supply, builders have been known to include white goods in the price of new properties in order to make their developments more enticing to first-time buyers.

The monthly fall in overall prices was 0.3 per cent in September, the same decline as in August.

The property market's downward journey has steadily decelerated since the 0.8 per cent monthly price falls recorded in April and May.

On an annual basis - from September 2006 to September 2007 - house prices fell 2.8 per cent.

For the second month in a row and for only the second time in the index's history, Dublin house prices fell, declining by 1.2 per cent in September.

Prices outside Dublin rose slightly by 0.1 per cent, according to the index, while prices in the commuter counties of Louth, Meath, Kildare and Wicklow also rose by 0.1 per cent during the month.

The average price paid nationally for property in September was €299,483, dipping back below the €300,000 mark for the first time since June 2006. The average price-tag during the month was €11,000 less than the price paid at the start of the year.

The sample of houses measured under the sub-indices for Dublin, outside Dublin and commuter counties reveals even greater price falls since the start of the year.

The average price paid for a house in Dublin in September was €405,343, down from €427,343 in December 2006.

Outside Dublin, prices have dropped from €266,339 to €257,372 since December. In the commuter counties, average prices have sunk from €344,186 to €325,813.

Although prices on new homes were unchanged, the cost of a second-hand property fell 2.2 per cent in September.

The prices paid by first-time buyers continue to fall at a faster rate than those for second-time buyers, dropping by 1.6 per cent and 0.3 per cent respectively in September.

During the first nine months of the year, prices fell 5.2 per cent for first-time buyers and 3.8 per cent for second-time buyers.

The index, which is based on a survey of properties for which mortgages are borrowed from Permanent TSB, measures rises and falls in house prices but takes into account the mix of properties sold in the period.