Builders warned yesterday that housing shortages threaten the Republic's main centres after new figures showed a drop in the number of planning permissions granted for new homes. Barry O'Halloranreports

The Central Statistics Office published figures showing that in the last three months of 2006, local authorities granted permission for 16,251 new homes.

The number was almost 5,000 fewer than the 21,203 new houses and apartments that got the green light from planners during the same period in 2005.

Industry body the Irish Home Builders' Association (IHBA) warned that the fall-off in planning permissions would squeeze the supply of houses in the Republic's main urban centres and particularly the capital.

A spokesman said that the association had identified the problem over two years ago.

"The striking feature is that it is Dublin and our other major urban centres that are most severely affected by the significant drop in planning permissions," he said. "In 2004, 24,000 new homes were granted planning permission in Dublin; this is now down to about 12,000, which indicates the likelihood of significant housing shortages in the capital over the next two to three years."

The IHBA estimated that demand for housing in the capital runs at 30,000 units a year. The body predicted that the gap between supply and demand would force up rents and leave people facing long commutes to work in the city.

Its spokesman blamed a failure to service land zoned for residential use, local authorities failing to adopt local area plans within a reasonable period of time and general delays in the planning process.

But he added that the most fundamental problem was "the failure to embrace the need for higher residential densities in our cities and towns".

Bank of Ireland said yesterday that house prices in Dublin rose 1 per cent in the three months to January, compared with 0.3 per cent in the rest of the country. Its chief economist, Dr Dan McLaughlin, predicted the housing market is in for a soft landing, but said gross mortgage lending this year would be unchanged at €4 billion, as the average loan size should increase.