Property prices could see high levels of price inflation as demand for housing outstrips supply, according to the Construction Industry Federation.

Improved affordability - reported by the Irish Home Builders' Association (IHBA) yesterday - coupled with Government reforms such as stamp duty reforms and interest rate cuts have generated the first shoots recovery in the housing market.

John Moran, Chairman of the IHBA said: "We can see now that there are queues outside some developments launched in the three or four weeks. Customers are voting with their feet and buying new houses again.

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"For the first time in many years it is cheaper to buy a new home than to rent a new apartment."

He added that the construction industry was gearing up to meet this renewed demand but admitted that it was unlikely to feed through into higher completions until 2010.

Hugh Fitzpatrick Director of Housing at the CIF said: "The improvement in consumer confidence reported by IHBA member firms will however lead to a pick up in housing starts as the year progresses.

"IHBA expects therefore that 2009 will see higher levels of residential construction activity than is currently the case. In terms of the final figure for completions, however, 2009 may fall between two stools, with units commenced towards the end of this year and early next year only being counted as part of the 2010 housing completion figures."

As a result, he said, high levels of house price inflation could return in key growth areas over the next year.

However, Mr Moran said national house price inflation over the longer-term would return to equal or near to levels seen elsewhere in the economy as housing supplies rose to meet demands, probably 2010 or 2011.

(VB/JM)