Property prices have fallen for the third month in a row, and have dropped by 2.1% in the first five months of 2007, according to the latest house price index compiled by Permanent TSB and the ESRI.

There was a notable decrease in prices paid by first-time buyers in May 2007, the average price paid for a house in May 2007 was down €2,453 compared with April 2007.

The average price of a house in the commuter belt in May 2007 was €332,917, down from €344,186 in December 2006.

The average house price paid by a first-time buyer was €272,667, while a typical second-time buyer paid €341,906 in May 2007.

The downturn in the property market means that the average price paid for a house has now fallen by 2.1pc in the first five months of this year to €304,166.

The number of recent interest rate increases have been largely responsible for the downward trend in prices, coupled with the recent uncertainty over stamp duty reform. This uncertainty over stamp duty has now been removed following the abolition of stamp duty for first time buyers (see related news article). However further interest rate increases are predicted for later this year.