A severe housing shortage - identified by the Government as one of the main threats to a recovering economy - is being tackled, but a turnaround will take time, some of the country's largest building firms have said.

While Ireland's economy is set to be the fastest growing in Europe for the second successive year in 2015, house building is struggling to keep pace, the legacy of a property crash which halved prices between 2007 and 2010 and ravaged the sector.

After building 93,000 new houses in 2006 at the height of the property bubble, just 9,500 new units have been built on average a year since 2010. 

That is less than half both the number built during the 1970s and the figure needed just to keep up with demand now.

"There are bottlenecks all over the system," said CRH chief executive Albert Manifold, pointing to fragile consumer confidence and the availability of finance for developers. 

He also noted an uneven recovery, with problems evident in the struggling, small town where he lives, 50km outside Dublin.

"We're slowly getting there but it's frustrating for everybody," Manifold, whose Dublin-based firm is the world's third-biggest building materials supplier, told Reuters.

The supply problem has pushed rents towards peak levels in Dublin, put pressure on social housing, increased homelessness and raised fears in Government that it could hurt the country’s attractiveness for foreign direct investments, a key element of the recovery.

It also helped fuel an initially rapid recovery in property prices that has slowed in recent months, a trend that may deter some builders but has also resulted in an easing in price expectations for development land, according to Cairn Homes.

Cairn, the first new home builder to list its shares on the stock exchange since the property market meltdown, said it had so far acquired nine prime development sites and was targeting another eleven with a potential to build about 1,600 homes.

Building supplies group Grafton, whose chain of Irish merchants have benefited from increased consumer spending with first-half revenues up 14.8% year-on-year, said it is only a matter of time before activity moves from house renovations and one-off builds to large-scale projects.

"It's just a symptom of being in a relatively early part of the recovery. As the recovery gains more traction, we should see some larger scale house building over the next three to five years," Chief Executive Gavin Slark said.

With bricks and mortar projects slow to get off the ground, demand is high for more innovative solutions like insulation and materials maker Kingspan's timber frame systems, structures that are quickly and cheaply constructed off site.

Kingspan Chief Executive Gene Murtagh believes there is "tonnes of scope" for sustainable growth in the construction market in Ireland, which similar to CRH and Grafton, represents just three percent of Kingspan's €2 billion annual revenue.

"At a percentage level, if Ireland was our only business it would be just fantastic," Mr Murtagh told Reuters.