Sir, – The ESRI estimates that Irish housing is about 17 per cent overvalued (“House prices are overvalued by nearly a fifth”, September 4th). Changing just one assumption made by the ESRI in its calculations produces an overvaluation estimate many times larger.The ESRI approach takes today’s housing stock as given and finds that house prices are about 17 per cent higher than would be expected based on population size and borrowing capacity. But it seems more intuitive to base overvaluation on the price impact of increasing the housing stock sufficiently to meet demand. The Housing Commission estimated that meeting demand would require 250,000 additional units or 10 per cent more housing.Using the ESRI model’s parameters (including a large housing elasticity of minus 3.9) implies, on a back-of-the-envelope basis, that a 10 per cent housing increase would reduce prices by about a third. Adding this figure to the ESRI’s gives a total overvaluation of three times 17 per cent. Apart from being a much larger number, this serves to bring out the acute intergenerational aspect of Irish housing. Affordable houses for would-be buyers, who are typically younger, means existing owners, typically older and often retired, would receive a much lower price for their homes. This is a necessary development, an underdiscussed aspect of housing policy and, plausibly, the main reason we build hardly any houses. – Yours, etc, CATHAL GUIOMARD,Cappawhite, Co Tipperary