* Freefall in prices now over but divergences across bloc
* Irish prices rise but still 45 pct below pre-crisis peak
BRUSSELS Jan 21 House prices in the euro zone
are recovering from the property crashes that nearly bankrupted
some members of the bloc, although real estate values in Ireland
and Spain remain more than a third below their 2007 peak.
The EU's statistics office Eurostat said on Tuesday that
euro zone residential property values rose 0.6 percent
quarter-on-quarter between July and September, their second
straight quarterly increase. Prices in Ireland rose 4.1 percent,
with a 0.8 percent increase seen in Spain.
While the data is more evidence of the euro zone's rebound
from recession this year, it also shows the hangover from the
property crash that followed the global financial crisis.
Ireland's house prices are still 45 percent below their peak.
House prices in the euro zone as a whole are about 5 percent
lower than their peak in the second quarter of 2008.
The bursting of property bubbles in Ireland and Spain - and
to a lesser extent, the Netherlands and Portugal - erased years
of economic growth and left banks with trillions of euros of bad
loans. Unemployment also remains at record levels after soaring
as the euro zone's crisis unfolded.
Ireland has now exited its EU/IMF bailout programme, while
Spain, which took aid for its banks, has said it will not
Meanwhile, an economic recovery is underway across the
single currency bloc that counted 17 members at the end of 2013.
Latvia, where property prices rose between July and September,
joined in January.
Wide divergences in the pace of recovery remain, however and
house prices fell in the quarter compared with March-June in
Italy and Slovenia, two countries struggling with high debts.
Property has generally retained its value in the wealthier,
northern economies of Belgium, France and Germany.
Compared to the same period a year ago, euro zone house
prices in the July-to-September period fell at a slower rate
than in previous quarters, contracting by 1.3 percent, while
Ireland was one of the few countries to show growth.
Unlike non-euro zone Britain, where house price expectations
hit a 14-year high in December, the euro zone's weak property
market will do little for households that are unable to buy when
banks remain reluctant to lend.
Despite record low interest rates, many families are
struggling to obtain financing to buy properties and banks are
lending less to the corporate sector, wary that the economic
recovery remains fragile.
(Reporting by Robin Emmott; Editing by Catherine Evans)