This year will see the highest level of private house building ever recorded in the Republic, according to the annual survey of the construction industry by the Department of the Environment.

According to the survey, the amount of private houses completed this year will rise by 11.5 per cent to 33,600; four years ago there were less than 20,000 private houses being built per annum.

The review shows that between 1994 and 1996, building activity has grown by 50 per cent.

The Minister for the Environment, Mr Dempsey, said yesterday that this was "unprecedented in the history of the State and unmatched in any other EU member-state". Building output now accounts for 17.5 per cent of GNP, up from 13 per cent of GNP in 1993.

However, Mr Dempsey warned that "building activity might be hampered by skill shortages" in the future.

He said there were already reports of localised skill shortages in relation to certain building trades - blocklayers and bricklayers.

He said that if FAS and the Construction Industry Federation (CIF) continued to work closely together skill shortages could be prevented.

The CIF has recently advertised in Britain to encourage skilled Irish migrants to return home and this has generated 3,000 responses, who are now being matched with job vacancies notified to the CIF.

The survey shows that one in 10 people at work are employed in the construction industry. There are 130,000 people working in the industry and for every 10 jobs onsite, there are four off-site.

Despite increases in house completions, future growth, particularly after 1997, may be constrained by several factors, says the survey.

Firstly, the excess demand for suitably skilled labour and secondly, the shortage of zoned and serviced land, especially in the Dublin area, which is pushing development out to the surrounding counties.

In addition to the forecasts for increases in residential construction activity, the survey predicts the volume of growth in the industrial sector will increase by 15 per cent.

Commercial development will increase by 9 per cent, according to the survey, although activity in the agriculture sector is expected to decline by 20 per cent.

The review says there has been exceptional growth in the retail sector in recent years.

In 1996 the level of retail development increased almost twofold, "with both city centre and suburban locations benefiting from the high level of consumer spending", new interest by British retailers also contributed to increased demand for retail space.

The CIF, in a comment on the report, said the current upturn was not a "boom", but a strong recovery from years of recession. According to the CIF director general Mr Liam Kelleher over the last six years, growth averaged 6 per cent per annum, which he said is comparable to growth in GDP over the same period.

"Turnover is not profit, margins in the industry remain tight, particularly for contractors," he said.

Mr Kelleher said public sector investment in infrastructure was being implemented at rates planned in 1993. "Much more is needed if the economy is to overcome its infrastructure deficit and position itself competitively in Europe."

He said private investment had anticipated and responded better to the higher rate of economic activity.