Ireland’s housing crash is finally showing signs of bottoming out, a new report from ratings agency Moody’s has claimed.

However, those expecting a significant recovery in prices may have to wait some time, with analysts noting a decline of around 50 per cent in house prices from their peak.

House prices in Dublin have shown signs of recovery, with a recovery in house prices in Dublin and rising rents due to a shortage in supply, and improvements in Ireland’s macroeconomic environment boosting confidence among buyers. Cash investors have also been tempted back into the market by higher rents.

“Despite these positive factors, the flat lending activities of Irish banks and the high outstanding household debt across the country will restrict the price recovery process,” the report said. “While prices will continue to slowly increase in Dublin, the temporary boost from cash buyers and supply restrictions will be insufficient to facilitate a significant recovery in prices.”

Mortgage arrears are showing signs of peaking, but Moody’s said there were still “substantial losses” to be realised, with the impact of negative equity also to be taken into account.

“There are a substantial number of Irish borrowers with unsustainable debt levels. High losses from these borrowers are inevitable either through repossession or, more likely for the majority of cases, debt forgiveness,” Mody’s said.

“We expect 90+ day and 360+ day arrears to stabilise over the coming quarters, following the already observed decreasing trend in our 60-90 days arrears during 2012. Despite the stabilising trends, a substantial number of borrowers have already defaulted.”