The Government is preparing to intervene in the residential property market, with moves under way to provide some form of State support for first-time buyers to buy newly-built homes.

This is highly-contentious ground, and Ministers would be well-advised to exercise great caution before proceeding with the plan.

Painful memories are still fresh of a succession of failed attempts by Fianna Fáil-led administrations to assert control over the rampant property market of the boom times.

Without any great success, economist Peter Bacon was called upon more than once to come up with the magic solution.

The situation was further compounded by an appalling litany of political and regulatory errors, not to mention epic laxity on the part of the banks. We live with the consequences to this day, with ongoing moves to set up an Oireachtas banking inquiry being just the latest effort to establish accountability for the costly debacle.

No return to bad habits
However, Taoiseach Enda Kenny and Tánaiste Eamon Gilmore insisted yesterday there would be no return to the bad habits of the recent past. Presenting their grand plan for the construction sector, they stridently dismissed Fianna Fáil's criticisms of the initiative and said State support for mortgage borrowers and their lenders was an appropriate response to market failure.

“At the peak of the housing bubble in 2006, over 93,000 housing units were completed across the country,” said the Taoiseach.

“The corresponding figure for 2013 was 8,301 – a reduction of 91 per cent . The sector has collapsed too far and we are paying the price in jobs and housing options.”

While proposed State support for mortgage borrowing is but one of dozens of initiatives in the new construction plan, it is certainly the most eye-catching. So what exactly is in play?

The perceived problem is that too few new homes are being built, as demand is too weak because young couples are unable to qualify for mortgages under stringent new lending rules from the banks.

Notwithstanding abundant State support for the banks themselves, the idea now is that the State would guarantee a portion of a first-time mortgage to encourage lending.

While the very suggestion of any kind of guarantee in the Irish banking context sets off alarm bells, the Government insists a carefully-measured degree of stimulation is required to correct the lop-sided market. Still, it is not difficult to imagine why the Construction 2020 document uses the term mortgage "insurance" instead of "guarantee".

Finance availability
"The objective of any scheme would be to ensure adequate availability of mortgage finance on affordable terms for new completions, particularly for first- time buyers, as the economy recovers, and in doing so to provide the certainty needed to support greater levels of investment in new housing," the document states.

To draw from remarks by Minister for Finance Michael Noonan, such aid could be used to help a couple who have a 10 per cent deposit to boost their lending credentials with a bank that is seeking a 20 per cent deposit.

Mr Noonan has also said the initiative would be restricted to the market for new homes, with the second- hand market disqualified from the outset.

None of this will be done immediately. Rather, the initiative is under examination in the context of early preparations for budget 2015 in October and the finance Bill that will give effect to it. The matter will go to the Cabinet committee on mortgage arrears and credit availability in November.

An economic impact analysis will be carried out by July, with a specific mandate to draw lessons from similar initiatives in the US, Britain and the EU.

Such an exercise is the most basic of requirements, for measures introduced by British chancellor George Osborne are widely held to have inflated parts of the market in England.

Mr Kenny and Mr Gilmore bristled yesterday when it was put to them that Fianna Fáil was claiming they were out to drive up property prices to shore up the balance sheets of the banks.

They also rejected claims that the mortgage initiative was nothing more than an election stunt.

Whether the proposal actually works is another matter. Balancing housing supply and demand is one of the most tricky political balancing acts of them all.