Tuesday 25 July 2017

'Scramble to buy' if Varadkar pulls the plug on scheme to build more homes

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Charlie Weston

Charlie Weston

Any bid to remove the Government's Help-to-Buy scheme would cause a surge in demand during the summer and then depress prices, a leading economist said.

Already one in every four first-time buyers is availing of the scheme, which provides a tax refund if they purchase a new home.

Economist with Davy Stockbrokers Conall Mac Coille said removing the scheme would cause a spike in demand from new buyers up to the point when it goes.

"Prices will likely be depressed for a period when it is taken away," he said.

Mr Mac Coille said there was evidence the scheme was encouraging more building.

"Statistics show that the Help-to-Buy scheme has had a significant impact on Ireland's illiquid housing market."

The scheme is proving to be hugely popular.

New figures show that more than 6,300 first-time buyers have either applied for it or had a tax rebate already paid.

Comments by Fine Gael leadership contender Leo Varadkar, that he may abolish the scheme if he wins, are set to prompt a rush to buy this summer.

Mr Varadkar said if a review of the rebate shows it is pushing up prices to unsustainable levels then he will scrap it. The scheme is not due to end until the end of 2019.

The Department of Finance has commissioned Indecon Economic Consultants to review it, with this due to be published in August.

Estate agents have claimed that prices could further rise in the short-term as first-time buyers scramble to buy properties amid fears the grant will be abolished.

Chief executive of the Institute of Professional Auctioneers and Valuers Pat Davitt said the threat to the scheme would cause a scramble to buy.

"The one thing the Irish property market does not need right now is more uncertainty, it is far too delicate," he said.

Rather than curtail it, Mr Davitt said there was a need to extend the scheme's life.

The scheme became operational in January.

It offers a tax rebate of up to €20,000 to first-time buyers who purchase a new home.

The property must be occupied by a first-time buyer or at least one first-time buyer when a couple are buying.

Of the 6,300 applicants, some 2,500 have been finalised, according to the figures from Revenue, seen by the Irish Independent.

Close to another 4,000 applications have been made. Some of these may not end up resulting in tax rebates as the applicants may not be able to find a home to buy.

So far, almost €19m has been paid out.

The popularity of the scheme so far this year means it is likely to cost far more than the €50m suggested by Finance Minister Michael Noonan when it was introduced in Budget 2017.

The Revenue figures show that more than a third of people who had a successful claim got a tax rebate of between €10,000 and €15,000.

The largest percentage of properties where successful claims were made were for those in the €226,000 to €300,000 price range.

More than a third, the largest percentage, had deposits of between 10pc and 15pc.

Buyers use the rebate from the Help-to-Buy scheme as part of the deposit.

The rebate scheme, combined with a lack of supply, and changes to mortgage lending rules, have been blamed for overheating the property market.

Irish Independent

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