First-time buyers big winners but no comfort for those hoping to trade up
Published 12/10/2016 | 02:30
FIRST-time buyers (FTBs) will enjoy a tax rebate of up to €20,000 for properties costing no more than €600,000 under a well-flagged 'Help to Buy' scheme.
Concerns that the cash boost would fuel property price rises were dismissed by Housing Minister Simon Coveney, who said it was an "academic discussion" due to the lack of new homes coming on stream.
The scheme applies from July 19 last until the end of 2019, and is solely targeted for new builds. Second-hand homes are not eligible. Between 4,000 and 6,000 FTBs could benefit next year, he said.
The relief is capped at 5pc of the purchase price, to a maximum of €20,000, and is based on income taxes paid over the previous four-year period - or 2015, 2014, 2013 and 2012.
For a home costing €200,000, just €10,000 can be claimed, or 5pc. For a property costing €400,000, the full relief of €20,000 can be availed of. For properties above this amount up to €600,000, a maximum of €20,000 can be sought.
The FTB will secure a letter from the Revenue Commissioners setting out the amount of the rebate to be claimed, which will be provided to a mortgage lender. This amount will be used to part-fund a deposit, and the money will be paid by Revenue to the purchaser and the cash remitted to the bank.
The amount claimed from Revenue must have been paid in taxes over the four-year period. You cannot claim more than you have paid in tax. A mortgage of at least 80pc of the purchase price must be drawn down. This is to eliminate cash buyers from the scheme.
The housing measures were welcomed by Jim Clery, head of real estate at KPMG. "The key measure is the Help to Buy scheme, which we hope will assist FTBs raise the necessary deposit to acquire their first home. It is highly targeted. We think it should help supply to increase," he said.
Some €1.2bn has been allocated for housing next year, an increase of 50pc. Some 21,000 families will have their housing needs met; and other measures include €98m to tackle homelessness (up €28m); funding to adapt 9,000 homes for the elderly and people with disabilities; €9m for Traveller accommodation; and €22m to remediate 400 homes affected by pyrite.
Some €152m has been allocated for the Housing Assistance Payment, up €105m, mortgage interest relief has been extended until 2020 for existing homeowners, and €50m has been provided to fund infrastructure works on land to open them up for housing.
Cork builder Michael O'Flynn said while it might make some housing more affordable, he was "not sure" it would help supply. A VAT reduction would have helped, he said. Cairn Homes CEO Michael Stanley said he believed house builders would "respond positively".
The Housing Agency said the package represented a "substantial investment" and that many measures would help utilise existing stock. Homeless charity Depaul said the measures would not only provide homes, but also improve social services for the most vulnerable.
Mr Coveney said costs were being reduced by streamlining the planning system, making public land available for housing "in a much more strategic and targeted way", coupled with new funding models for housing.
"We think it sends a really strong signal to developers and builders to get on and build homes. I'm confident we'll see a response from industry," he said.
He added he had a "lot of sympathy" for families hoping to trade up, and that the extension of the Home Renovation incentive for two more years - where tax relief is available to extend or refurbish homes - would help.
"We had to prioritise," he added. "We could have tried to reduce the cost of every house. The problem then is you're not prioritising the most vulnerable sector of the market."