* Average house prices up 0.2 pct in May, down annually
* Analysts say positive sign, but too early to call bottom
* Weak lending, unemployment will weigh on market
By Conor Humphries
DUBLIN, June 25 (Reuters) - Irish house prices posted their first monthly rise since 2007 in May, data showed on Monday, in the latest sign that the market is stabilising after the bursting of an epic property bubble devastated the economy.
A stabilisation would ease pressure on the country’s banks, whose mortgage portfolios have been devastated by the price collapse. One in seven Irish home loans were not being fully repaid in the first three months of the year.
Irish property prices, which have suffered peak-to-trough falls of 50 percent, increased 0.2 percent in May, their first month-on-month rise since September 2007, data from the central statistics office said.
Property prices continue to fall on an annualised basis, down 15.3 percent in the year to May, but the rate of decline is easing. Prices fell 0.9 percent in the three months to May, down from 5.7 percent in the three months to February.
“It remains to be seen if it is the market taking a break or if it is the end of price falls,” said Ronan Lyons, economist with property website Daft.ie. “It would be a surprise if it was as simple as this” he said.
Daft estimates that price-to-income and price-to-rent ratios in Dublin would suggest that property prices are no longer overvalued, but the situation is less clear in other parts of the country, Lyons said.
Prices rose for the third successive month in Dublin, where demand has surged in certain popular areas, the statistics showed. Properties in Dublin were 0.2 percent in May while the rest of the country increased 0.1 percent.
However economists polled by Reuters this month expect national property prices to fall by 12 percent in total this year and a further 5 percent in 2013.
While strong interest has seen properties exceeding their asking prices in some parts of Dublin, economists say that high unemployment and weak lending will continue to weigh on the market.
Unemployment hit a post-crisis high of 14.8 percent in the first quarter, more than three times the level in 2007. Mortgage lending by Irish banks has fallen 95 percent since its peak in 2007 and stands at just over one-third of the level seen two years ago, according to the Irish Banking Federation.
“On a practical level it is difficult to see people rushing out to buy a house when labour market conditions remain very fragile,” said Alan McQuaid, economist with Merrion Stockbrokers.
“That said, the May house price data are a step in the right direction and suggest the worst may be over.”