Saturday 3 December 2016

Stockbrokers tip banks and builders as main winners from Budget 2017

Published 13/10/2016 | 02:30

Help-to-buy scheme could boost house building
Help-to-buy scheme could boost house building

Banks and builders are the main winners from minister Noonan's €1.3bn budget package, according to Irish stockbrokers Goodbody and Davy.

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The new help-to-buy scheme was introduced to improve the mortgage market and increase house building.

Goodbody tipped AIB and Permanent Tsb to be the biggest beneficiaries from the scheme, which the broker said should help to underpin mortgage lending next year.

Finance Minister Michael Noonan unveiled the scheme that will see first-time-buyers gain income tax rebates of up to €20,000.

In the four years prior to buying the Government will pay a rebate up to a maximum of 5pc of the purchase price of the house, up to a limit of €400,000.

The inventive was brought in to stimulate the housing market here and both Goodbody and Davy expect the move to boost the mortgage market.

"The Help to Buy scheme is likely to be supportive of new mortgage lending next year through improved affordability and in time stimulating more activity in the market.

"This should support all banks, though clearly the likes of Permanent Tsb and AIB would be the most directly impacted given their exposures to the mortgage market," Goodbody said in a note.

Shares in Permanent Tsb rose as much as 6.2pc yesterday in early trading before easing back later.

At Permanent Tsb, 85pc of its loans are mortgages, while at AIB the figure is 50pc.

Davy was also optimistic for the banking sector after the scheme was announced.

Analyst Emer Lang said the move was "broadly positive" for the sector and that it should help move the mortgage market to a more sustainable level.

Merrion Stockbrokers said that Irish equities have come under renewed pressure in the past few weeks due to concerns regarding Brexit and US interest rate increases.

It added that domestic Irish bank stocks are preferred picks, because it believes that the tax relief offered in the Budget is as close to "helicopter money" as Europe is likely to see,

It said Cairn Homes is now its "preferred residential play", having acquired about 11,000 home sites at an average price of €51,000. "We view Permanent Tsb as a distressed asset play on the Irish national housing market," the broker added.

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