A report issued by the Economic and Social Research Institute (ESRI) has said government interference in the property and building sectors could impede in the necessary cooling down of the market.

The latest quarterly economic commentary revealed the slowdown in house building is much sharper than expected and while house prices by December could be 15 per cent lower than last year, mortgage repayments could rise further.

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The ESRI, which is forecasting a 2.7 per cent growth rate for next year, says the housing slowdown is the dominant influence, but it is part of a process of returning the economy to a sustainable growth path.

Therefore, the ESRI concluded that the government should not interfere in the situation by artificially propping up house prices or building activity.

Only 12,000 new jobs have been forecast for 2008, compared with 80,000 in recent years and inward migration is also expected to drop sharply.

The report also says the possibility of a banking collapse needs to be recognised, and the increase in government spending needs to be halted.

(JM)