Ireland faces significant challenges in making construction more economically and practically viable to build the 52,000 homes needed annually by 2050, the country's central bank said on Wednesday.

Housing has been a high-profile political issue for years. A slow recovery in the construction sector after the 2009 housing collapse has led to home prices and rents outpacing income growth, even as the population grows faster than expected.

The central bank on Wednesday estimated that after hitting a 15-year high of around 33,000 units last year, it will fall to 32,000 this year before reaching 39,000 in 2026. She said clear policy changes are needed to cross 50,000 units.

This depends on a number of interrelated areas: the reorganization of complex planning processes, roughly doubling development funding, improved construction productivity and the availability of more zoned and serviced land, particularly in Dublin, according to the analysis.

“This is a major challenge,” the central bank's economic director Robert Kelly told reporters, adding that the government's plans to reach 50,000 units a year will not work without substantial improvements across the board.

The report recommends that public investment focus on infrastructure and directly finance more serviced land, encourage the state to adopt modern construction methods to increase lean productivity and scale, and use its balance sheet to stimulate private investment.

The imbalance between supply and demand has “significant economic costs” of prolonged policy inaction, including higher living costs and higher costs of doing business, which could harm Ireland's position as a center for foreign direct investment, the report said.

In its regular quarterly update of economic forecasts, the central bank said on Wednesday that the outlook for economic growth and inflation was unchanged from June, and it expected revised domestic demand (MDD) – the preferred indicator of economic performance. 2.4% growth this year.