Minister for Housing Simon Coveney has said he expects new homes will be delivered in Dublin for a sale price of about €260,000 once measures announced in the housing strategy take effect.

This would represent a significant drop in the price of houses for new buyers.

Surveys have shown that the average cost of building a three bedroom semi-detached house in Dublin, including an 11 per cent profit margin, is currently €330,000.

Mr Coveney denied Government measures to assist first-time buyers would lead to price increases. He said the measures announced in the housing strategy on Tuesday would were also designed to increase the supply of housing, making it easier and cheaper for developers to build new housing estates.

“There is a gap here between what first time buyers can afford and what builders can build houses for,” Mr Coveney told The Irish Times politics podcast.

“We have to close that gap by doing two things. One, we need to reduce the cost of building a house . . . and secondly we need to increase the capacity of first-time buyers to be able put the finance together to buy a home.”

The Government would seek to achieve the latter through changes in the Budget, said, where a package for first-time buyers is widely expected.

“I think we will be able to find a way to get houses built in Dublin for €250,000-€260,000 - that type of price range,” he said. “We are only talking about giving first-time buyers the capacity to raise a mortgage more easily for new houses, at a certain price level. Whatever we do for first time buyers, it must drive supply as opposed to simply overheat demand.”

The Housing Strategy unveiled by the Government said that a couple earning the average industrial wage could not afford to rent or buy a house costing more than €250,000. However, research by the Society of Chartered Surveyors and others found “significant challenges” in delivering houses at prices below €300,000, the report found.

Mr Coveney on Tuesday unveiled the Government’s action plan for housing which aims to increase the number of homes built per year to 25,000 by 2021. It also aims to provide 47,000 social housing units in the same period, with funding for social housing increased to €5.35 billion from a previously announced €3.7 billion.

The Government is working on a so-called help-to-buy scheme for first time-buyers, which will be outlined by Minister for Finance Michael Noonan on budget day in October.

The scheme will provide first-time buyers with assistance in purchasing a home and will be tied in with incentives for developers to build new houses.

Mr Coveney confirmed that any measure for first-time buyers and developers would be backdated to Tuesday to ensure there was no adverse effect on the market.

Figures involved in preparing the action plan said the value of any package for first-time buyers must be about €10,000 per couple to have tangible impact.

"The Department of Finance is very cautious around introducing tax measures that might distort the market inappropriately, like happened in the past," Mr Coveney added.

“Whether that is holiday homes or student accommodation or whatever. There is a recognition in the Department of Finance that at the moment first time buyers are simply locked out of the market.

“If you look at the Dublin market where most housing activity is at the moment, there are really no houses being built for less than €300,000.

“More than 50 per cent of the house buying market is first time buyers. At least two thirds of those have simply no chance of getting a mortgage for that amount of money.

“So two things are happening here. First of all, you have a lot of first time buyers who want to buy but can’t afford a mortgage, who can’t get a mortgage under the (Central Bank) rules, and, secondly, you have developers who want to build for first time buyers but who are not building for first time buyers because they know they can’t afford the houses they’re building.

“You have a supply that is stalled and you have a demand that wants to buy but can’t afford to buy. There is a gap here between what first time buyers can afford and what builders can actually build houses for and we have to close that gap by doing two things. One, we need to reduce the costs of building a house and, secondly, we need to increase the capacity for first time buyers to be able to put the finance together to be able to afford to buy a home.”

Speaking earlier on Inside Politics, economist Colm McCarthy as said Government assistance for first-time buyers would not address the issue of a shortage of housing and would only serve to increase house prices further.

Lorcan Sirr, a lecturer in housing with Dublin Institute of Technology and Professor Tony Fahey of University College Dublin agreed that the key pillar of the Government's housing plan could cause house prices to increase further.