Davy says in its weekly market comment report that a 10 per cent drop in house prices would lead to negative equity – where a mortgage loan is higher than the value of a property – to the value of €728 million, or 0.5 per cent of residential mortgages.

It is forecasting a 12 per cent decline in house prices this year but said first-time buyer house prices were falling at a faster rate.

A 10 per cent drop in house prices would leave 40,000 first-time buyers in negative equity by the end of this year, Davy said.

In 2006, 36 per cent of mortgages to first-time buyers were 100 per cent home loans, while 69 per cent had a loan-to-value (LTV) ratio of more than 90 per cent.

Davy said a fall in house prices ranging from 5 to 15 per cent would leave between 22,000 and 55,000 first-time buyers in negative equity.

Davy analyst Stephen Lyons, said falling house prices and rising negative equity had personal rather than financial consequences. “If a person’s job is lost, that would be a big concern but unemployment is not on the same par as in the UK in the early 1990s when there was negative equity.”

Lyons said first-time buyers might change their plans to sell so as to avoid making a loss. “I don’t think anyone will want to realise the loss. I think people will sit and hold on to their property, and hope that the capital appreciation will come back so those who had intended to stay in a property for three to four years will probably stay for longer,” he said.

In recent months, most lenders have dropped 100 per cent mortgages as Euribor inter-bank rates have returned to credit crisis highs. On Monday, the 3-month Euribor rate was 4.857%  compared with the ECB's benchmark rate of 4%. Before the credit crisis, the typical margin was 0.150%.

Investors who bought houses in recent years on interest-only loans are also facing grim choices as capital repayments start to kick in at a time of falling prices and a soft rental sector.

Goodbody Stockbrokers Chief Economist Dermot O'Leary said recently in a report on the Irish economy, that although in theory affordability has been improving over recent months due to the combination of falling house prices and stable ECB interest rates, it now includes a practical caveat in that conclusion. Due to a wave of innovation over the past decade, mortgage products became available to an increased number of potential homeowners. This manifested itself in the form of increased loan-to-value ratios, lower retail interest rates and longer mortgage terms. The increased loan-to-value ratios were sufficient to counter the difficulty that potential homeowners would have in raising the initial deposit. Due to the recent tightening of lending standards, this process seems to be in reverse. For example, 100% LTV financing, which accounted for 36% of total first-time buyer mortgages in 2006 is now largely unavailable. Therefore, access to increased equity for a house purchase may delay the likely upturn in demand due to falling house prices.

...and  commercial  building  is  likely  to  fall  in  2009  -  Commercial construction  has  enjoyed  an  impressive  performance  in  recent  years. However,  this  is  a  very  cyclical  industry,  and with demand prospects weakening  and  credit becoming less freely available, this industry is now expected to contract in 2009.

The Irish Auctioneers and Valuers' Institute reported in January that there were 40,000 vacant apartments in Dublin.

It estimated that the price of apartments fell 17% 2007.

Poor quality apartments without a car space and inadequate storage space, were snapped up during the buying frenzy in recent years.

Travellers on the DART train service in Dublin can observe that at the site of the former gas works, near Barrow Street Station, residents of apartments that cost about €450,000, have to store  bicycles on their balconies.