The rapid rise in house prices is causing supply-side pressure in the economy, according to the stability programme for 1999 to 2001, which Mr McCreevy will submit to the European Commission.
The programme says the long-term solution must be based on a greatly increased supply of housing to bring supply and demand into balance. It adds that there has been an easing of house price inflation since autumn 1998.
Mr McCreevy said in his speech yesterday that Exchequer support for local authority and social housing programmes has been set at £269 million in 1999, up 20 per cent on the year before.
He said this increased funding will, among other things, allow 600 extra local authority "starts" to bring the number of units to 4,500. He added that this is the highest level of local authority housing since 1986.
He added that the allocation by local authorities for hostels for the homeless has doubled from £2 million to £4 million on the previous year's estimate.
The EBS Building Society said the comments in the stability programme are a recognition by the Government that "house price increases could eventually spill over into general inflation". The EBS said, "House prices are now putting Ireland's economic growth and our relatively recently adopted culture of partnership into jeopardy.
"We have to ask ourselves how is it that new house prices can more than double in a period when construction costs have increased by less than 20 per cent", Mr Martin Walsh, head of lending at EBS, said.
He said despite the announcement about local authorities, significant housing construction is now confined to the area outside the Dublin region. "In Dublin housing construction has stagnated at approximately 13,000 units per annum over the last couple of years," he added.
"Vast tracts of land are accessible on the northern fringes of the city as well as along the Maynooth, Navan and Drogheda railway lines," he said.
"Given the statement in the stability programme it is now to be hoped that decisions will be taken at a level which will lead rapidly to action on the ground," he stated.