The decline in Irish residential property prices accelerated last year to 16.7 percent from 10.5 percent in 2010, data on Tuesday showed, as a weak domestic economy and low mortgage lending continued to hit demand.

Irish property prices rocketed before the property bubble burst in 2008, leaving banks with huge losses and homeowners with hefty mortgage repayments.

Average residential prices are now 47 percent below their 2007 highs, while prices in Dublin are 55 percent off their peak.

With low transactions, constrained mortgage lending and an uncertain economic environment, house prices are likely to continue falling in 2012, said Conall Mac Coille, chief economist at Davy Stockbrokers in Dublin.

In stress tests on the Irish banking sector early last year, the central bank assumed a 55 percent peak-to-trough fall in residential property prices between 2007 and 2013 and a 62 percent drop in its adverse scenario.

Mac Coille said prices may well reach that 55 percent level before bouncing back, but noted that foreclosures appear much lower than the stress tests assumed, giving banks some leeway.

The Central Statistics Office, whose numbers are based on mortgage data from Ireland's largest banks, said average residential prices fell 1.7 percent in December, faster than the 1.5 percent decline the previous month.

The index last posted a monthly increase in September 2007.

(Reporting by Conor Humphries; Editing by Catherine Evans)