Proposals from the Organisation for Economic Co-operation and Development (OECD) to introduce a property tax and abolish mortgage interest relief would not provide a long-term solution to the escalating property market, economic consultant, Dr Peter Bacon, said yesterday.

Speaking at the spring lunch of the Association of Chartered Certified Accountants, he said supply side initiatives coupled with an approach which would incorporate "financial innovation", such as shared equity schemes, were the solutions to the pent-up housing demand.

Any fiscal measures introduced to reduce demand would ultimately fail. The demand for housing was real, and was based on real economic growth, real change and generally favourable debt/ equity positions.

"The basic problem in the Irish market is that demand and supply are mismatched. Fiscal measures have a temporary impact," he said.

The solution, Dr Bacon said, lay in recognising that the relative price of houses in the State, and in Dublin more particularly, had changed, probably permanently.

"The solution is on the supply side. The way to do it is not to suppress demand, the way to do it is to enhance supply," he said. Supply side initiatives included increasing house density ratios to continental norms through the creation of new designs. "It is a question of building more houses that are different and are spatially different to the pattern that has happened before now."

In relation to the letter sent by the governor of the Central Bank, Dr Maurice O'Connell, to the banks and building societies warning that they were lending too much to mortgage borrowers, Dr Bacon said "the genie is out of the bottle" and there was a genuine case to look at the mortgage lending rules of 2.5 times main income plus one times a partner's income. The rules were "less relevant" today. They were devised when interest rates were much higher than now and when "the translation of gross income into net income was poorer than it is now", he said.

"I think there is a lot you can do in the current environment about making lending criteria easier."

In addition, shared equity schemes could be made available to first-time buyers where they would buy part of the property and complete the purchase "further in the career cycle".