Up to 5 per cent could be wiped off house prices this year as the market heads in the direction of a "bust", an economist has claimed. Jerome Casey, who worked for several years in the building industry, believes house prices will fall by up to 5 per cent this year and by a further 5 to 10 per cent next year.

Writing in the Building Industry Bulletin, which he edits, Mr Casey argues that housing growth in the 2002-06 period had been supported by borrowing and based on expectation rather than real economic growth.

"The best that can be said about the increase in house prices and output since 2002 is that it anticipated future growth in the economy and that current housing price and output levels will be validated when economic growth catches up."

But the Construction Industry Federation, whose membership includes most of the State's biggest house builders, said yesterday the market has given no indication of a downturn. "We have seen no sign of house prices falling in the new homes market," said spokesman Martin Whelan.