IMF warns State's Help-to-Buy scheme adding to pressures on housing market
Brexit challenge and US tax cut plans also highlighted in report
The International Monetary Fund (IMF) has warned that the Government's controversial Help-to-Buy scheme for first-time buyers may add to demand pressures in the market.
Its latest report on Ireland has highlighted housing as one of several challenges facing the country.
The Help-to-Buy scheme introduced earlier this year offers first-time buyers who purchase a new-build home the opportunity to claim tax back of up to €20,000. It has faced criticism by opposition politicians and economists amid claims it is contributing to a rise in property prices.
The IMF report says housing pressures have risen in Ireland, driven by a mismatch between renewed demand for housing and a lag in supply.
In relation to the Help-to-Buy scheme, Michelle Shannon - the current IMF head of mission to Ireland - said: "We have cautioned that this could contribute to demand pressures."
The Department of Finance last year announced that there would be a review of the scheme which is to begin soon.
Ms Shannon said the IMF welcomed this review as it could provide an evidence-based opportunity to assess the impact of the scheme.
She said any decision on whether the scheme should be amended, continued or got rid of would depend on the review's outcome.
A Department of Finance spokesman said Minister Michael Noonan had committed to the review and the Government would listen to its findings.
The spokesman said: "The scheme is there to help people and incentivise extra building and the provision of housing."
He added that increasing supply was the Government's number one priority.
Mr Noonan recently rejected suggestions that the Help-to-Buy scheme increased house prices in the first three months of the year. He told a Dáil committee that around €10m had been injected into the market due to the scheme so far and there were "no circumstances" where that level of extra spending could drive prices up.
The IMF report was as a result of a routine annual mission to Ireland and is not related to the Troika bailout that the nation exited in 2013.
It warns that external risks to the economy are high.
The report says Brexit is the "most pressing and far-reaching challenge for Ireland".
While its effects have been modest to date, the impact over the medium term is expected to be negative and significant.
The IMF report also says that Housing Minister Simon Coveney's Action Plan for Housing and Homelessness "appropriately focuses on support for vulnerable families" as well as measures to kick-start expansion in housing supply.
"While signs of progress are emerging, a more robust supply response will take time," it says.
Mr Coveney said he was confident that sufficient social housing would be developed to ease the homelessness crisis in the country.
He said that a combination of measures were now in place to provide housing across all levels.
"We have about 8,500 social housing units in the pipeline at the moment across 503 different projects, involving every county in the country. My message to all of the chief executives and to the councils is very clear, I want you to be giving the level of priority to delivering social housing that we are trying to give a lead on in the department of housing. I expect a sense of urgency in terms of delivering those projects."