CREDIT RATINGS agency Fitch expects further drops in residential and commercial property prices in Ireland, it said yesterday.

Fitch said it believed there would be a 45 per cent decline in house prices from peak to trough. To date, the Permanent TSB/ESRI index suggests house prices have fallen 35 per cent.

Fitch said the full effect of Ireland’s distressed mortgage market had yet to be felt in the performance of securitised mortgage investment products.

“While arrears levels continue to increase, very few loans have yet had their security enforced,” Fitch said, in reference to the relatively low number of repossessions in the Irish market.

If the economy continues to stagnate, this would generate “greater stress” on mortgage markets, it added.

Fitch also said further downgrades to either the sovereign ratings or the credit ratings of AIB and Bank of Ireland would have an impact on its structured finance and covered bond ratings.

Ronan O’Driscoll, head of residential property at Savills Ireland, said it had seen property values fall by at least 50 per cent on average, with property selling prices sinking up to 66 per cent below peak prices in some cases.

“With prices now back to 2000 levels, there appears to be a bottoming out of prices, certainly for lower and mid-priced houses in the traditional city suburbs,” Mr O’Driscoll said.