THE housing market could be heading for a period of consolidation after the recent boom, the Irish Housebuilders' Association was told yesterday.

According to Mr Pat Cox MEP, the special rate of VAT on housing is set to go, while Dr Dan McLaughlin, chief economist at Riada Stockbrokers, warned that the Central Bank was becoming concerned about the pace of growth in the market.

Dr McLaughlin added that a move towards maximum mortgage advances of 85 per cent may be requested by the bank.

Mr Cox warned that EU proposals for a definitive VAT regime would see the light of day by the end of the year.

The Irish government currently levies a special rate of 12.5 per cent on housing as opposed to a general rate of 21 per cent.

This was agreed in 1992, he told the delegates, and the transitional arrangements were due to expire at the end of the year.

"But all is not lost," according to Mr Cox. "The concept of a reduced rate for housing is potentially justifiable for social reasons," he said.

Dr McLaughlin also warned that another rate cut in Germany could be resisted here. "The bank will be reluctant to acquiesce to another mortgage cut," be said.

"I would expect to see house price inflation decelerating again, in response to housing supply and in order to bring prices back in line with earnings."

According to Dr McLaughlin, second hand house prices have remained in a narrow range relative to earnings. They reached a high of 4.5 in the early 1980s and a low of 3.2 in 1987. The average figure over the period is 3.8, the same as the figure for the end of 1995.

"On that basis, house prices were not expensive last year," he said. "However, if prices rise by 12 per cent in 1996 and earnings by 3.5 per cent the ratio would rise to over 4.1. This implies a double digit rise in house prices in 1997 is very unlikely."