The Irish Home Builders Association says current trends signal that only around 37,000 new homes will be built next year, down from 45,000 this year.
In a report, it says the medium-term demand for housing is 60,000 a year. Over 92,000 units were built in 2006.
IHBA Director Hubert Fitzpatrick said today that his group expected higher levels of house building activity next year, though this may feed through to housing output figures only in 2010.
"Given that the medium-term demand for houses is 60,000 units each year, this would result in supply falling far short of demand in key growth areas next year,"Fitzpatrick said.
"Based on this medium-term rate, supply and demand equilibrium would not return to the housing market until 2010."
Fitzpatrick expressed confidence that improving sentiment in the housing market would encourage higher residential construction activity than suggested in recent statistics.
"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.
"From the industry's perspective, however, there is a potential for increased employment in the sector compared to current levels of employment in residential construction," he said.
Fitzpatrick added that houses were now more affordable and that the main sources of uncertainty in the market in 2007, including stamp duty issues, have been addressed.
The IHBA said the main sources of uncertainty in the housing market - stamp duty and mortgage interest relief - had been addressed, while fears of more interest rate rises had been dispelled.
The IHBA today launched a new website - http://www.homefacts.ie/ - aimed at guiding people through the process of buying a home.
It has also announced a code of practice for its members which covers the setting up and operation of housing and apartment management companies. It says the code is binding on all members.
