Property and economic experts are warning that an over-supply in the housing market will cause prices to fall further in the short run, but that long-term the market will recover.

They identified the decision of the ECB to hold interest rates for the third month in a row as a key factor in restoring confidence to the market, with one expert saying that the cycle of rate hikes is as good as over.

However, a survey of house prices has shown that since March almost 4,000 houses have dropped in price, wiping €113 million off the value of properties.

According to a number of property experts, while the market is soft at present, the sharp reduction in the number of housing completions combined with the halt in interest rate increases will, over the coming months, help restore confidence among house buyers.

John McCartney, Head of Research with Lisney estate agents said yesterday: "What we are seeing at present is the backlog of an exceptional year in terms of supply last year coupled with a reduction in demand. Of course when there is over supply, prices will come down. But those reductions have been marginal. The slowdown is giving the market some breathing room to clear that backlog from last year."

Dermot O'Leary, chief economist with Goodbody stockbrokers said: "We believe that the fundamental demand in the market is about 65,000 completions a year. The stock of houses is more than demand at the moment, but it is welcome."

Last week, it emerged that there has been a sharp 58 per cent drop in housing starts since last year which will mean that the number of housing completions will fall next year to 60,000, from 93,000 last year. However, with the population rising by 2 per cent a year, experts believe that demand will return.

McCartney added: "There is an underlying demand out there. A huge section of the population is in the 25-45 age bracket and with the national pay agreement our net income is rising. Coupled with that is that for the first time in two years interest rates have not been increased for three consecutive months. Many of those people have held off and are renting at present but given all those factors and the general Irish disposition of wanting to own our homes, then I think we will see sustainable growth returning in the coming months. It's all about confidence."

The experts don't believe there has been a credit squeeze but the reduction in loans being offered is simply an issue of affordability.

O'Leary said: "There hasn't been a criteria change in the bank's policies. It is only about what people can now afford given all the successive hikes in interest rates."

Despite the optimism, after years of soaring house prices the market, in the wake of uncertainty about stamp duty reform, first slowed then stagnated and is now languishing in a state of coma, which has seen millions wiped off the value of properties.

A new definitive survey of movements in the Irish property market shows that since March, almost 4,000 properties have had to lower their prices, wiping €113 million off their value.

The new survey on Irishpropertywatch.com, gives the exact state of play every month.

With growing fears and speculation that the collapse of the housing market will have drastic ramifications for the entire economy, the Sunday Independent has identified a number of multi-million-euro houses that have seen their values slashed in recent months, both in Dublin and other areas around the country.

Last month, more than 700 properties dropped their price with more than 20 seeing their prices drop by more than €100,000.

Also included in the 723 house price drops for August, which wiped €20 million off the value of the properties, were a number of houses and buildings over the €1 million mark.

Many of these have seen price reductions of over 10 per cent, with a small number dropping by a staggering 25 per cent.

The highest percentage price fall was on Lissadell House, Strand Road, in Portmarnock, Co Dublin. The luxurious 4-bedroom house which was this weekend on the market for €2 million had previously been asking for €2.75 million, a drop of over 25 per cent.

Another house in excess of €2 million that fell significantly was 89 Strand Road, Sandymount, Dublin 4. The Victorian 3-bedroom-terraced house was formerly on the market for €2.5 million but was last night on Myhome.ie for €2.25 million. Elsewhere, a five-bedroom house in Clonskeagh in Dublin has fallen by 20 per cent to €1.2 million. 17a Gledwood Avenue, a newly completed building in one of Dublin's middle class areas, was previously on offer for €1.5 million.

Out of Dublin, one of the most noted properties which fell last month was Castlefleming House, Errill, Co Laois.

The stunning country house and 30 acre site fell by over €400,000 to €1.25 million and was still for sale last Thursday.

While the collapse of the market is clear to see from this survey, on the flip side there has been a moderate number of houses showing price increases.

Last month, 61 properties increased their asking price, however all of them were on a much smaller scale than the price drops.

For example, 124 Capel St, a two-bedroom city centre apartment in Dublin is now on sale for €575,000, compared with its previous price of €450,000.