HOUSE PRICES will fall a further 20 per cent before reaching the bottom of the cycle in late 2009, having already dropped 15 per cent since their peak in 2007, according to a report on the European housing market by debt rating agency Standard & Poor's.

In a section of the report entitled "Ireland: In Free Fall?", the agency said the Irish property market was the first in Europe to start declining, reaching its peak in March 2007 and falling 15 per cent since then to October 2008.

S&P said conditions in the mortgage market reflect "a continued deterioration", as net lending of €7.7 billion from January to September 2008 compares with €12.7 billion a year earlier.

The agency said the number of first-time buyers fell 32.3 per cent in the same period.

"Reflecting an imbalance similar to that observed in Spain, new home completions in Ireland have shrunk to an estimated 42,000 in 2008 from 78,000 in 2007. Looking ahead, we expect completions to plummet to 25,000 in 2009," the agency's report states.

Demographic trends render the outlook for housing markets even more uncertain, S&P said.

The agency said Ireland received 10 times as many immigrants from new member states as from the previous EU-15 states.

S&P said the flow of immigrants stimulated the Irish buy-to-let market, "adding fuel to the housing boom", and that "the fear is that a large number of migrants will return home".

The agency cited figures from business group Ibec, which suggested that as many as 100,000 people could have already left Ireland this year.

"Net emigration would have a negative effect on the demand for dwellings," it said.