According to the Department of the Environment, Heritage and Local Government, since January 2006, 51,752 new homes and apartments were completed nationally . . . some 23.6% more than in the same period of 2005.

Commenting on the news, housing minister Noel Ahern stressed that these figures show the government is committed "to maintaining the high levels of housing supply, with targeted policies aimed at increasing the provision of both social and affordable housing."

In line with his argument in favour of affordability, the minister went on to blast the property speculators and banks, accusing them of being responsible for "screwing up" the housing market and hiking prices. In a predictable menu of accusations, Ahern claimed that the introduction of 100% mortgages with maturity in excess of 30 years accounts for some 10% of our current price appreciation.

As always, reality is not as co-operative as our government would like it to be.

Indeed, the government takes more than 40% of the property price in taxes, charges and levies, making it the largest 'speculator' in the market for new homes.

In terms of price growth, according to CSO research, "the cost of building and construction materials increased by 24% between 2000 and 2005. By comparison, the average house prices increased by 64% over the same period."

Suppose 10% is due to the banks, as Ahern claims. Another 8-10% goes in after-tax profits to the 'speculators' who resell their properties in less than 18 months. The remaining 20% of the overall responsibility for property inflation falls onto the state's shoulders.

Here is how this trick pony works. Through zoning, planning, targeted tax breaks, environmental and other restrictions, the state creates surplus construction activity in the areas targeted for development . . . the border counties, the west and the midlands.

The surplus is mopped up by second-home buyers as tax shelters. This state 'planning' reduces investment in the regions with robust demand for new housing . . . ie, the urban centres with higher income and population growth. The resulting bottlenecks in property supplies in Dublin, Cork, Galway and Limerick generate higher prices. The exchequer then collects added revenue from the VAT and stamp duty on properties.

According to data from the CSO, since 1995, regions with higher personal income saw lower rates of growth in construction. At the same time, counties with faster growing incomes did not experience more building. Finally, more new homes were built in the areas with declining or slowly growing population than in the areas with fastest growth in demand.

These facts suggest that we are building more homes in the areas where there is less demand and lower ability to afford these homes. Perhaps this is what the government calls "increasing provision of affordable housing, " but it hardly helps to reduce demand pressures in the demographically saturated markets such as greater Dublin, Cork, Galway and Limerick. Border counties accounted for nearly double the share of Dublin in the overall number of planning permissions granted in the country in 2005.

Thus, the supply of new permissions has fallen by approximately 25% between 2000 and 2005 in Dublin, while the demand for housing increased by at least 5% due to population growth alone. This accounts for roughly half of all price appreciation in the market for the period. It also implies that, contrary to Ahern's claim, the banks together with the speculators cannot account for much more than 10% of the overall house price inflation . . .

some three times less than the state's share.

Ahern calls for taxing 'speculators' and restricting banks' lending. Given that the state policies may be responsible for three times greater damage to property prices in this country than the 'speculators' and the banks, if the state were a private business, Mr Ahern would have its directors restricted for abuse of market power.

Q.E.D.