THE National Treasury Management Agency (NTMA) says house prices here have further to fall as disposable incomes also decline.
The views are revealed in a wide-ranging review of the economy published by the NTMA last night which was shown to prospective investors during roadshows to drum up support ahead of this week's successful bond swap deal.
"Residential property prices have further to fall but the commercial market has probably bottomed," the review says.
The NTMA is the state agency responsible for managing the national debt and controls NAMA, the biggest owner of commercial property in the country and the biggest owner of residential property after the State.
The outlook for the property sector was part of a mostly upbeat economic assessment. The NTMA said the economy grew last year for the first time since 2007, thanks to exports that have so far remained resilient despite the global slowdown.
Economic conditions are improving but the NTMA warns the success seen so far could be under threat. Domestic demand may continue to fall this year, hurting the chances of general growth in the economy, the report adds.
It notes families are getting poorer and disposable income has fallen every year since 2008 due to rising taxes and falling wages. Household wealth is back to 2003 levels.
The NTMA says the reduction in the interest rate Europe charges for bailout loans helped make those kind of trends easier to swallow for struggling families. But even with Ireland doing all it can to hit fiscal targets, the euro crisis could still prove a threat to exports, and therefore to the entire recovery.
On a more upbeat note the NTMA says that Ireland is now living within its means -- with a current account surplus. The banks have been successfully recapitalised, the threat to the 12.5pc corporation tax rate is gone and the economy has started to become more competitive. The presentation says NAMA could make an operating profit of €600m for 2011.