In a blow to the government’s hopes of boosting the housing construction market, the Central Bank of Ireland has again reduced its forecast of how many houses will be built this year, now estimated at 32,500 units.

That figure is just 2,000 more than last year and marks the second time this year the bank has reduced its housing forecast, following its March reduction from 37,000 to 35,000.

The prediction from the central bank's quarterly bulletin is in sharp contrast with the government’s target to deliver 41,000 homes this year, which is still significantly below the circa 52,000 units estimated to keep up with the backlog per annum.

The central bank has also reduced its forecast for housing completions in the coming years, predicting 37,500 next year and 41,500 in 2027.

The central bank pointed out that completion of dwellings was below expectations in the first quarter after starts dropped sharply to just 2,981 units, down from 17,017 in the fourth quarter, when builders were rushing against the deadline for a development levy waiver.

The bank said its new lower forecast may have to be reduced further, “given current bottlenecks in housing supply and infrastructure.”

It also highlighted the need for increased productivity in the construction sector and for more water, energy, transport and communications projects.

However, the Construction Industry Federation rebutted this view and insisted that the industry does have the workforce, skills and technology needed to meet housing targets.

“The real barriers are outside the industry: planning delays, a lack of zoned land, slow rollout of enabling infrastructure like water and electricity, and reduced funding for apartment developments from international investors,” CIF Director of Housing and Planning Conor O’Connell said in a statement.

“We hope that the newly established Strategic Housing Activation Office will play a pivotal role in advancing housing delivery and turn key proposals into action. The industry is ready. What’s needed is a co-ordinated response to unlock land, streamline planning and support infrastructure investment,” he added.

The central bank also said Ireland needs a 30% increase in construction workers if the demands for new housing, retrofitting and public infrastructure are to be met at current productivity levels.