Monday 25 September 2017

FF targets homes under €400,000 in Vat plan

Paschal Donohoe. Picture: Collins
Paschal Donohoe. Picture: Collins
Niall O'Connor

Niall O'Connor

Fianna Fáil's plans to slash VAT on private house building will be targeted at developers who sell properties at below €400,000.

A memo due to be sent to the Fianna Fáil parliamentary party this week states that the reduced VAT rate of 9pc is needed in order to "stimulate affordable housing construction" and will be "limited to affordable units only".

TDs and senators will be told that the proposal, being sought as part of measures in the Budget, is aimed at helping two-income households earning roughly €80,000. The document also describes claims by Sinn Féin that the plan will cost €240m as "overblown".

Under Fianna Fáil's projections, a property that costs €312,000 to build is sold on the current market for approximately €390,000, once the VAT rate of 13.5pc and the 10pc developer's profit is factored in.

If VAT is slashed to 9pc, the selling price for the property would be reduced to €344,000 before the builders' 10pc profit is factored for a final selling price of €371,000 - which the party says represents what the "average income couple could afford".

Fianna Fáil's housing spokesperson Barry Cowen has also called for building levy cuts for builders, as well as cheaper financing to speed up building.

"The reduction, as part of a suite of measures, directly incentivises the building and sale of homes at affordable prices," the document states.

"These are homes with prices that can be bought on middle incomes, roughly at or below €80,000 for a two income household.

"The VAT reduction stimulates supply. As it would only be for three years it aims to ramp up construction activity in the short term."

Government sources last night described the proposal by Fianna Fáil as "misguided" and warned that it would prompt developers to sell the properties at the highest point of the threshold.

It comes as Finance Minister Paschal Donohoe and his junior counterpart Michael D'Arcy held pre-Budget talks with the Construction Industry Federation (CIF). It's understood CIF bosses pressed the need to maintain the help-to-buy scheme, which is aimed at first-time buyers.

The scheme sees State rebates of up to €20,000 handed out to those who wish to get on the property ladder. It only applies to new builds. However, Taoiseach Leo Varadkar suggested during the Fine Gael leadership contest that the scheme will be reviewed amid fears it is driving up prices. CIF director general Tom Parlon pressed for the need to invest more in infrastructure.

Irish Independent

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