Irish property prices fall for second successive month

DUBLIN (Reuters) - Irish residential property prices fell for the second successive month in February, dropping 0.4 percent to slow a recovery from a real estate crash.

Property prices have rebounded sharply - as much as 14.9 percent - after being cut in half by the bursting of a bubble in 2008. They were the fastest growing in the European Union in the 12 months to end-September 2014, according to the EU's statistics office.

The month-on-month drop last month followed the first contraction for 10 months in January, with property prices in Dublin, which led the recovery, falling by 0.7 percent in February to stand 21.4 percent up on a year earlier.

Prices were flat outside of the capital.

"We believe this heralds a welcome slowdown in Irish house price inflation rather than a collapse in prices," said Conall Mac Coille, chief economist at Davy Stockbrokers, who said at over 5 times average incomes, house prices no longer look cheap.

"This slowdown is not surprising or undesirable. Ideally, Irish house prices will now rise in line with nominal wages so affordability is not stretched further."

Both Mac Coille and Goodbody Stockbrokers' Dermot O'Leary said the recent falls will probably be temporary as the data from Ireland's Central Statistics Office related to agreed sales late last year while transactions have been stronger in January and February.

They also said it was too early to say what kind of dampening effect new central bank restrictions on mortgage lending will have.

While prices across Ireland are 39 percent below their 2007 peak, the central bank brought in the new limits in January to try to ensure price rises do not return to unsustainable levels.

The Economic and Social Research Institute (ESRI), an independent think-tank partly funded by the Irish government, said on Wednesday that while the measures may slow down house price growth, this could come at the expense of rising rents and fewer houses being supplied amid major shortages in Dublin.

(Reporting by Padraic Halpin Editing by Jeremy Gaunt)