POOR DEMAND and oversupply of houses are continuing to drag down house prices, according to the latest Permanent TSB/ESRI House Price Index.

Average national house prices fell by 1.5 per cent in June and have declined by 11.7 per cent in the year to the end of June, the index shows. The average price for a house nationally in June was €241,504, compared with €261,573 in December and a peak of €311,078 in February 2007.

Reacting to the figures, the Professional Insurance Brokers’ Association (PIBA) said excessively tight bank lending was preventing first-time buyers from entering the market.

“Banks must be prevailed upon to behave responsibly and not ratchet up interest rates unreasonably when the ECB is likely to keep rates low for some time,” said Rachel Doyle, PIBA’s director of mortgage services.

In Dublin, house prices fell by 1.3 per cent last month and are down by 8.9 per cent in the first six months of 2009. Over the year to the end of June, Dublin house prices declined by 15.8 per cent.

Outside Dublin, house prices fell 0.7 per cent last month and by 5.4 per cent over the first half of the year. House prices fell by 10.4 per cent in the 12 months to June.

The average house price in Dublin at the end of June was €319,754, compared to €351,096 in December.