OECD backs Central Bank on house price memo

The Organisation for Economic Co-operation and Development (OECD) has said it is not standing by an element of a controversial memo that has been disputed by the Central Bank.

A spokesman for the Paris-based body was responding to comments by the bank following the publication on Monday of details of a confidential memo concerning Irish property prices.

The memo was written following a meeting between officials from the bank and the OECD, and records that "econometric work by the OECD secretariat suggests that prices are 15 per cent overvalued".

The memo records the Central Bank officials as suggesting that "any numerical estimate of overvaluation should be presented only with extreme caution to avoid destabilising the market".

The content of the confidential memo was reported in The Irish Times on Monday. The bank responded by denying it suggested "extreme caution" be exercised by the OECD in releasing its estimate on property prices.

A spokesman for the bank said "the OECD version of events is not agreed" and that the officials who attended the meeting "did not remember" saying that the information should be treated with caution.

Yesterday, a spokesman for the OECD said it accepts what the Central Bank has said about the memo and that, therefore, its memo must be incorrect in this regard.

"We stand by what the Central Bank says. We are not going to contradict their version of what happened. We accept that the memo must be incorrect."

The spokesman said that the OECD was not disputing the accuracy of the report in Monday's newspaper.

He said that the memo was one which had not been widely circulated within the organisation but, when the report on Monday was noted, no one within the OECD had suggested that it contained any inaccuracies.

The memo sums up the preliminary conclusions of officials working on the next Economic Survey of Ireland, due to be published officially in January.

The memo was sent to the secretary general of the OECD, Donald Johnston, on October 10th.

Economic surveys on member states are published approximately every two years by the OECD and look at the long-term policy decisions needed to maintain economic growth in individual member states.

The memo says the house price boom in the Republic could end "not with a bang but with a whimper", but raises concerns about the direction of the market.