Minister for Finance Brian Cowen has defended the Government's stance on the property market, saying that a "soft landing" is in prospect.

Mr Cowen was responding to the Economic and Social Research Institute's (ESRI) Medium-Term Review, which yesterday warned that the economy was too reliant on construction for growth and called on the Government to take action on the issue. A spokesman for Mr Cowen said the Minister welcomed the ESRI's analysis and acknowledged the risks attached to the high proportion of construction activity in economic growth.

He said, however, that the Government's approach to curtailing property tax incentives on a phased basis was "sensible" and designed to "avoid unnecessary disruption to this important sector".

The ESRI's Prof John Fitz- Gerald had called for an immediate removal of property incentives, also suggesting the elimination of mortgage interest relief.

Mr Cowen also rejected the ESRI's claim that the State has an "excessive dependence" on its low corporation tax rate. His spokesman said the Government's commitment to the 12.5 per cent rate was "beyond doubt".

He pointed to the Government's commitment to invest in education and infrastructure. "For these reasons, the Minister does not accept the ESRI view that the economy is excessively dependent on our low corporation tax regime," he said.

The Minister for the Environment, Dick Roche, also defended Government policy yesterday, saying it was delivering on the State's infrastructural needs.

The Construction Industry Federation, which represents builders, said housing supply had to remain high if the market were to stabilise and moderate.