A report by credit rating agency Standard & Poor's has predicted that house prices in Ireland are likely to fall by another 10% this year, before reaching the bottom next year.

But the report, which looks at housing markets across Europe, claims Irish house prices look undervalued by about 12% at the moment when compared with long-term averages.

The agency says lower average mortgage rates have boosted affordability, but demand for housing remains weak. It says high unemployment and economic weakness mean consumers will remain cautious this year, while oversupply of houses is also contributing to continuing price falls.

S&P says house prices seem to have steadied in most countries - apart from Ireland and Span - but warns that a second dip in prices remains a possibility in several markets later this year or early next year.

It believes the downturn in European house prices from 2007 onwards may not yet have fully wiped out what it calls the 'excesses' of the earlier housing bubble.