Charlie McCreevy was right. As he suggested to journalists in Luxembourg on Tuesday, some of the measures which the Government has now taken to deal with soaring house prices are "quite dramatic" and should "help to take the steam out of the housing market."

He was talking about the report by economic consultants Peter Bacon and Associates on house prices and what action might be taken to deflate the current "bubble". And it is clear from that report and the Government's response to it that several sensible solutions have been suggested - and adopted with alacrity.

Had Bacon and the Government taken heed of some of the wild clamour from the construction industry for extensive land rezoning in the Dublin area, we might have been dealing with a potential disaster. Instead what we have got is a wide-ranging package of measures which seems to make eminent sense.

Quite rightly the consultants recommended - and the Government has accepted - that any decisions on additional rezoning of land in the greater Dublin area should await the outcome of another consultancy report by Brady Shipman Martin on strategic land use planning in the region, expected in mid1999.

In terms of planning, the Bacon study seeks to make optimum use of the lands already zoned for development by proposing an accelerated programme of investment in water and sewerage infrastructure and by increasing residential densities. In both cases, the Government has not been found wanting in its response.

The Minister for the Environment, Mr Dempsey, immediately announced that the £15 million fund already provided under the 1997 Serviced Land Initiative would be doubled and that his Department would also identify water and sewerage schemes which might be provided by the private sector.

The Department is already committed to promoting higher housing densities under the previous government's Sustainable Development Strategy, published a year ago. And pending the preparation of strategic planning guidelines, it will prod the local authorities in this direction.

The Bacon Report concedes that "high-density housing" is not particularly popular. There is still some confusion in the public mind between "high-density" and "highrise" housing; it bears repeating over and over again that Ballymun, even with all of its towers and slab blocks, is actually a low-density scheme.

Bacon emphasises that suburban housing density in Ireland, at six to 10 houses per acre, is very low by European standards. Yet the almost manic devotion to this standard simply has not worked; some housing estates have such low densities that it is not even worthwhile to install a gas grid, never mind good public transport.

The report points out that several apartment schemes in Dublin, built at densities of up to 100 units per acre, have achieved public acceptance. And while it is obvious that this cannot be replicated in the suburbs, there is no reason to believe that we cannot achieve higher housing densities in a well-designed environment.

As Bacon says, high-density housing with shared spaces requires "very high standards of architectural skill"; it is not simply a question of "grossing up" the standardised suburban form of repetitive house types with front and back gardens. Whether developers take this essential message on board remains to be seen.

Perhaps the most welcome measure in the package is the slashing of stamp duty on the purchase of second-hand houses. The old rates had become a quite penal obstacle to young people setting up home in established areas closer to city centres. Instead, they were almost forced to buy newly-built houses on the urban periphery.

The Government's response has been even more generous than Bacon. Its new sliding scale of stamp duty, which will be the subject of a Financial Resolution in the Dail next Tuesday, levies a 3 per cent rate on properties costing between £60,000 and £100,000 - one percentage point less than the report recommended.

This long-overdue reform of stamp duty mitigates a major distortion in the market by allowing first-time house purchasers to consider the option of acquiring a second-hand house, without having to pay a huge State levy. All they need now, for the sake of equity, is to qualify for the same grant available to purchasers of new houses.

The Government has been more hesitant about Bacon's proposal that all "Section 23" tax relief for investors in private housing should be abolished. Instead, the incentive is being retained where it can be shown to be "absolutely necessary" in the context of an Integrated Area Plan under the new urban renewal scheme.

But Fianna Fail will certainly have surprised some of its own supporters by tackling what Bacon called the "speculative bubble" of investors buying up houses on new suburban estates - a phenomenon which has clearly had an impact in forcing up property prices beyond the reach of hard-pressed first-time buyers.

These investors will no longer have their speculative investments underpinned by the State. From yesterday they will not be allowed to write off interest on borrowed money against tax liability - and they will also have to pay stamp duty. This should be sufficient to deter even the more rapacious wide boys.

However, the package does nothing for people in private rented accommodation - a sector which accounts for the bulk of housing on the Continent and is likely to become more significant here in the future. An average individual living in a rented flat will continue to receive a paltry tax allowance of £500 a year.

To encourage the release of land for residential development, a reduced 20 per cent rate of capital gains tax will now apply - ostensibly for four years, after which it will return to the 60 per cent rate. The current income limits for shared ownership schemes have also been raised, in line with Bacon's recommendations.

Other matters covered include the idea that there should be longer-term mortgages of up to 35 years, with a fixed interest rate option for the first five or 10 years. The Central Bank might also be checking on the policies of mortgage-lenders to ensure that we do not follow London into the "negative equity" stakes.

The Director of Consumer Affairs will be pursuing the Bacon proposal that there should be a voluntary code of practice under which housebuilders would agree to cease the practice of charging excessive stage payments. As the report correctly points out, this has also had an effect in "rachetting up" house prices on new estates.

The construction industry will be pleased that more resources are being allocated to An Bord Pleanala - both extra board members and planning inspectors - to expedite appeals. And as for the local authorities, Mr Dempsey says the new system of local government finance should allow them to hire more staff, too.

What effect the package will have on house prices is anybody's guess. Demand for housing is so high - because of heavy net immigration, especially by young professionals - that it probably will not have much impact in the upper brackets.

But then, its main objective is to alleviate the desperate plight of first-time buyers.