Few countries, if any, have ever experienced a property crash like the Irish property crash. It wrecked the whole economy and ruined countless lives. In this context, it is incredible that the Government policy response to the incipient bubble in the Dublin market is so shambolic.

If the former head of asset management of the National Asset Management Agency is to be believed, the same sort of knee-jerk approach to policy formation that led to catastrophe in 2007 is being followed today.

Last week, John Mulcahy claimed that, almost seven years after the crash, there is no coherent set of data that tells policymakers in real time what is happening in the property and construction markets.

If ever a country needed such a data set it was Ireland, you would have thought. Instead, according to Mulcahy: "We are making decisions on property on the basis of no information, wrong information or information that is out-of- date."

Despite being a small country, with just 4.5 million people, we still don’t know how many houses we need and where to build them, he claims.

The inference from his comments is that policy in this area continues to be made on the hoof and is vulnerable to all the special pleading and political lobbying that served the public interest so badly the last time around. It’s hard to disagree with him.

The rapid increase in Dublin house prices clearly took the Government by surprise. It also seems to have no idea what is the root cause of it and thus what is the solution. As a result, vested interests have filled the vacuum and seem to be driving the policy response.

The loudest voice is the construction lobby. Their analysis is simple. Supply is not meeting demand, they say, and thus prices are going up. The solution is to increase supply through a number of measures that, not surprisingly, benefit the constituencies they represent.

They believe there is a lot of suitable zoned land not being developed because existing planning permissions and conditions make it uneconomic to proceed with development. For example, they say, there is planning permission for many apartment complexes, but nobody wants to buy apartments.

Simplified argument
If the economics of developing this land can be improved by measures such a altering densities and reducing levies, the banks will put up the money, the development will proceed and the supply problem will be eased. Simple really.

The construction lobby may well be right, or at least partially right, in their analysis. But common sense would tell us that making policy on the basis of the recommendations of a group that stands to benefit from the implementation of their recommendations is, at best, risky.

Some sort of external validation or independent supporting evidence would be advisable before following such a course of action.

And that brings us back to Mulcahy’s point. The Government would appear to have no way of assessing whether the industry’s policy recommendations make sense – which they quite possibly do – or amount to short-sighted special pleading.

The Government is aware, however, that the beneficiaries of any move in the direction advocated by the construction lobby will include those developers still left standing after Nama has done its work. This will, of course, generate understandable anger in many quarters and, to add insult to these people’s injury, many of these developers will be backed by Nama itself .

It would be a very brave politician indeed to expose themselves to all of that flak on the basis of the construction lobby’s unverified assertion that it is the way to solve the housing supply problem in Dublin.

The result is policy paralysis and ever-rising house prices.

Lack of evidence
The Government is expected to publish a construction strategy in the next few weeks. It would be surprising if it does not give the construction lobby some of what it wants, as they have made a strong case. There may not be any evidence to back up their case, but neither is there a compelling counter-argument put forward by anyone else.

The Government can be expected to follow the line of least resistance in such circumstances and a “strategy document” will give them some cover.

Let’s hope the construction lobby has got it right this time.