Irish construction expands for first time in 6 years
* Good news for government a day before budget
* Residential housing construction fastest since Dec 2005
* Ireland due to complete bailout in December
DUBLIN, Oct 14 (Reuters) - Ireland's construction industry grew in September for the first time since 2007, indicating the bailed out economy may be picking up steam, a survey showed on Monday.
Construction powered the country's "Celtic Tiger" economic boom, fuelled by easy lending, but then imploded spectacularly when credit lines dried up during the global financial crisis from 2007.
Housing prices fell by a half but have now started to rise again, particularly in Dublin where they have jumped 10 percent in a year, fuelling some concerns of a new bubble and calls to build more.
The pickup in construction suggests Ireland's economy is gaining momentum after emerging from its second recession in five years in the second quarter although it is expected to deliver virtually no growth this year.
The Ulster Bank Construction Purchasing Managers' Index rose to 55.7 from 49.7 in August, moving above the 50 line that divides expansion from contraction for the first time since May 2007.
The sharp rise was driven mainly by expansion in construction of residential housing, which grew at its fastest rate since December 2005. Construction of commercial real estate also increased.
"The September results show that the nascent recovery in activity levels is producing a stabilisation of employment among survey respondents," said Simon Barry, Ulster Bank's chief economist for Ireland.
The country is on course to become the first euro zone country to exit its EU/IMF international bailout in mid-December and may do so without a financing backstop from its partners.
It has to deliver more savings to rebalance the economy but has indicated it will go against international lenders by moderating a package of cuts in its 2014 budget, due to be unveiled on Tuesday.
House prices are being driven higher because, while there is a huge oversupply of housing in inconvenient locations, there is little spare capacity in sought-after areas of Dublin where prices are now growing at their fastest rate since the crash.
(Reporting by Sam Cage; Editing by Susan Fenton)