House-builders must cut their prices following the Government's abolition of the first-time buyers' grant or homebuyers will buckle, the Minister for the Environment, Mr Cullen, has said.
Speaking to the Master Builders and Contractors' Association, Mr Cullen said: "In changed economic times, income levels are levelling off yet house prices continue to increase. Something has to give.
"In the late 1970s and early 1980s, house and land prices went to unsustainable levels and this, in turn, led to a serious downturn in the market. We do not want to revisit that again."
Despite public opposition, he said there was "general acceptance by the public, economists and industry" that the €3,800 first-time buyers' grant had been absorbed by builders.
Acknowledging that the abolition of the grant was "a difficult decision", Mr Cullen said: "Now that it is no longer there, housebuilders must look at their pricing structures.
"The decision to abolish it is, I believe, the right one. I am charged with the responsibility of using the taxpayers' money wisely and spending it on incentives that will give the most benefit.
"My choice is that I will spend the money on building more social and affordable housing, and housing for people with special needs. It is the right choice," he told the association's annual dinner.
"House prices must reflect the fact that people's incomes are not infinite in the current economic slowdown. Builders must take the broader economic picture into account.
"Price rises cannot continue on the current scale or the housebuyer will buckle.What is required now is a period of consolidation and stability in the housing market."
Meanwhile, Mr Cullen said changes would be made shortly to controversial sections of the 2000 Planning and Development Act, but builders would still have to set aside 20 per cent for social and affordable housing.
Since the Act's introduction, the Construction Industry Federation has blamed it for a slowdown in the number of houses built, arguing that the 20 per cent rule was unpopular with ordinary housebuyers.
"Let me be crystal clear; there will be no change in the 20 per cent guideline for social and affordable housing. What we need is less rigidity and more workability to ensure that the policy delivers."
Dealing with the National Development Plan, he said capital spending next year would run at €7 billion. "Admittedly this is not as high as you would like it. But it does represent a huge commitment from public funds."
