The Government seems unprepared to recognise "the folly of its intervention" in the residential property market, according to Mr Ciaran Ryan, director of the Irish Home Builders' Association (IHBA), which held its annual convention in Killarney, Co Kerry, last weekend.

Commenting after the four-day conference, which was attended by more than 100 companies, he said there was a 17.1 per cent drop in new house start registrations with Homebond since last year .

"This fall began as far back as last August. Over 10 months later, the Government has still not addressed this decrease," he said.

Mr Ryan said new house construction was down by 30 per cent in Dublin, Cork, Galway and Limerick. Sligo and Waterford have shown similar reductions. He called for the removal of the two-year planning guillotine from the statute books "as a matter of urgency".

"The necessity to reapply for planning permission for schemes already approved is crazy. We need more houses and it is disingenuous to ignore the time delay that reapplying brings," he said. Regarding Part V of the Planning and Development Act 2000 - which provides that up to 20 per cent of new developments be set aside for social and affordable housing - he said it was clear from local authority housing strategies that the demand for affordable housing exceeds that for social housing.

He added that the Government and local authorities should do more to promote affordable housing options such as the shared ownership scheme. "Many buyers are not aware that as little as £1,000 might qualify them for the home ownership," he said. He also called for the reintroduction of mortgage interest relief to bring investors back into the market. It is predicted that more than 50,000 lettings will be needed in Dublin by 2006 to meet demand. "This is possible without impacting on the first-time single buyers' market. Without investment, overall supply will never meet demand and this exposes the most vulnerable buyers, low to middle income, to the greatest risk."

Speaking at the conference, Mr Alan Carthy of Fingal County Council said that to successfully implement Part V of the Planning and Development Act, local authorities must develop a Housing Strategy and examine their land holdings. If their supply of land is inadequate, "the local authorities will have to embark on a land acquisition programme either by agreement or by utilising their Compulsory Purchase powers".

Fingal County Council's programme aims to provide 2,200 affordable houses between 2000-2005, some of which are already occupied in Swords and Malahide. Development is about to commence on 425 affordable houses in Mulhuddart as well as 100 social houses and 175 private houses. But he said many local authorities have been "slow to participate in the development of affordable houses".

Builders have several options under Part V of the Act. They can provide the local authority with the required percentage of land, with the required percentage of development sites, with the prerequisite number of built units and in limited cases they can offer a cash contribution.

By handing over land, the developer runs a commercial risk "in that he has no control whatsoever over what development the local authority may place on the site or the pace of such development," said Mr Carthy.

"If such lands were to be developed prior to any major development on adjoining lands, it could prove very difficult to market a high-class upmarket development immediately adjacent to a large high-density local authority development."

The best option from a developer's point of view may be to offer completed units, as "he can control both the location, size, type and deliverability of such units."

Dr Dan McLaughlin, chief economist at the Bank of Ireland, said personal income growth was the key factor affecting demand for housing, which will stay strong this year. He said overall household debt in Ireland is low by international standards, and as rates decline the affordability of housing will improve. "Housing supply will fall by some 42,000 units this year from almost 50,000 last year, reflecting the impact of policy measures and a decision by suppliers to pull out of the market," said Dr McLaughlin, adding that the general market is holding up with prices rising by 19.5 per cent in first four months of this year, "with the top end hit by high sector woes and fall in equity values".