The Minister of State for Housing and Urban Renewal, Mr Bobby Molloy, has described as "erroneous and misleading" a claim that investor demand within the first-time buyers' market had re-emerged as a major problem.
Mr Brian Hayes, the Opposition spokesman on housing, had said that close examination of the 1998 housing report revealed that virtually a third of all new houses built that year were purchased without mortgages. He said in a press release that it was therefore logical to assume that a large proportion of new homes were still being purchased for investment.
The disagreement between the Minister and Mr Hayes centres on the correlation and conclusion drawn by the Fine Gael TD that the figures meant there was greater investment demand.
The Minister, describing Mr Hayes's conclusion as erroneous, said he wanted to clarify the matter and set the record straight.
"The actions taken by the Government in April 1998 have calmed investor activity in the last 18 months since the removal of certain financial incentives, and the ratio of loans paid to private house completions is back to its normal level," he said.
While Mr Hayes asked why so many houses were purchased last year without mortgages, the Minister said that on average only about 70 per cent of private house completions were paid for through mortgages.
Mr Hayes said the total house completions in 1998 was 42,349, whereas only 27,355 loans were paid by financial institutions and local authorities to purchase such houses. Therefore, 14,994 dwellings were bought without mortgage. He asked why this was so.
It was obvious from the figures that investor demand within the first-time buyers' market had re-emerged as a major problem, and a large proportion of homes were still being bought for investment purposes, he said.
"This is having a major effect on the level of house-price inflation in the greater Dublin area," Mr Hayes added.
The Minister, in response, said Mr Hayes had assumed that the total number of houses completed in 1998 required mortgage loans. In fact, 3,263 of these houses were supplied by local authorities and voluntary housing bodies and did not require mortgages. Therefore, the correct base figure to work from was total private completions of 39,086.
"On average, only about 70 per cent of private housing completions are paid for by mortgage loans, and there are several reasons why such a gap exists," he said.
He said that in many cases people, for example retired people, who sold their houses and bought smaller homes might not need to take out mortgage loans. Likewise, those who had saved sufficient funds or were inheritors did not have to borrow funds.
Some house-buyers were able to pay for direct labour over a period, or to build the house themselves, with their own funds. There was generally a time lag between a house being completed and the drawing down of a loan approval, sometimes by a few months. Some houses completed late in 1998 would not be bought until 1999.
"Deputy Hayes's analysis of the situation and his assertion that this data indicates that investors have returned to the housing market are quite misleading. It is more realistic to assume that the majority of investors require mortgage loans to finance purchases.
"This is borne out by the significant increase in the ratio of loans paid to private house completions in 1996 and 1997, when there was increasing investor activity," he said.
However, the actions taken by the Government in April 1998, following the Bacon report on housing, had calmed investor activity in the last 18 months.