Devil will be in the detail on help for first-time buyers
Published 16/09/2016 | 02:30
Confirmation that first-time buyers will get some help in Budget 2017 will come as a huge relief to those hoping to secure a home and get onto the property ladder.
But the devil will be in the detail. The Government will have to be very careful that any help provided, and a figure of €10,000 has been suggested, does not fuel house price increases and instead helps those genuinely in need.
We know the relief will take the form of a tax rebate from the Revenue Commissioners, and will be back-dated to last July. We also know it will only apply for new houses, and not second hand, and will be linked to the value of the property, and targeted at affordable homes.
In Dublin, these units are priced at some €300,000, and at around €250,000 in Cork and Galway.
The reason why help is deemed necessary is because Central Bank rules introduced in January last year require first-time buyers to save large deposits before getting mortgage approval. Some 10pc of the first €220,000 required must be saved, and 20pc of the balance after. For a €300,000 home, that requires savings of €38,000 - a tall order at a time when rents are now back to boom-time levels and rising. While the final details will not be revealed until Budget day, it seems that a borrower will be able to top up their savings with a tax rebate, which will allow them secure a mortgage.
There's huge demand for property, but only expensive units are being built. The problem is there isn't the capacity to buy at the price that developers are prepared to build.
The Government is hoping that two measures will help ensure the rebate doesn't go into builders' pockets. The first is a measure already enacted, whereby developers building affordable homes in Dublin and Cork are eligible for a rebate of levies once the sale of the property has gone through. In Dublin City, that could knock €9,000 off the cost of a 100 square metre home. In South Dublin, it's worth €12,000.
The second is the €200m Infrastructure Fund. This is designed to fund essential services including road access, amenities, diversion of utilities and other works needed to open up sites - many of which have planning permission - for development. In Dublin, a threshold of 500 or more units may be used, falling to 200 or more in Cork.
The fund is designed to deliver affordable homes, marketed at first-time buyers. To avail of the fund, you must demonstrate you will deliver affordable homes.
Housing Minister Simon Coveney says the measures will help speed up delivery of homes for first-time buyers.
"I don't want excuses any more from developers on first-time buyers," he told the Irish Independent.
"They're telling me for quite a while they can't build and make a margin with the kind of mortgages which first-time buyers can afford. What we will do in terms of financial support for building a new house, and the other things around levies and so on, I hope will be a tipping point." We'll wait and see.