Saturday 24 March 2018

Why first-time buyers need no Budget help - says economist

Ronan Lyons: house sales up. Photo: David Conachy
Ronan Lyons: house sales up. Photo: David Conachy
John Mulligan

John Mulligan

There is no real compelling case for introducing Budget measures to help first-time buyers, TCD economist Ronan Lyons has claimed.

In a report from property group Daft, published this morning, Mr Lyons pointed out that the number of new homes being sold in Dublin and the rest of the country is continuing to rise.

He said that the number of new homes sold in Dublin was 63pc higher in the first half of 2016 than in the first six months of 2014. Elsewhere, the increase was 15pc.

"With this evidence, it is tough to argue that there is a compelling case for help for first-time buyers in the upcoming Budget," he said.

Mr Lyons argued that it is more important for the Government to tackle the actual cost of building new homes, which are subject to punitive VAT levies.

"Politically, it may be necessary to be seen to be doing something to help first-time buyers," said Mr Lyons, who authored the report.

"However, once the Budget passes, it will be time to focus on the far more important business of lowering construction costs in order to make new homes affordable for those on average incomes."

Mr Lyons also argued that the current social housing programme "is not fit for purpose".

"We know how a social housing system ought to work," he said. "It should give those who have insufficient incomes to cover the costs of their own accommodation enough of a top-up that they have somewhere to call home.

"This means it should be explicitly counter-cyclical: when the provision of market housing falls, the need for social housing rises. Tying the provision of social housing to market housing - as Ireland does - makes no sense whatsoever," he added. also released a house price report for the third quarter this morning.

But the reports today from Daft and Myhome are at odds over how much house prices have increased during the summer.

Daft claims that average house prices in the third quarter rose 3pc between June and the end of August, with a 2.7pc climb in Dublin and 3pc elsewhere.

But said that prices for newly listed properties rose just 0.4pc nationally in the quarter compared to the second quarter, and by only 0.1pc in Dublin in the period.

Myhome said that represented just a €1,000 rise in prices in both the capital and across the country.

The property group said the average national price of a new home is now €232,000. In Dublin, it is €327,000.

A severe shortage of supply is continuing to depress the number of transactions, which were down 5pc in the period covered.

The Daft report said that the average home price nationally in the third quarter was €221,000 and €323,000 in Dublin.

The author of the report, Conall MacCoille, said that following a busy summer trading period, asking prices are cooling as autumn gets underway. Mr MacCoille is the chief economist at Davy Stockbrokers.

He added: "The big picture is that the lack of housing supply is now clearly hurting transactions," he said, noting that in the first eight months of the year transactions are down 5pc.

"Clearly there are few constraints from the mortgage market with €1.8bn of approvals in the three months to August."

Irish Independent

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