Sunday 15 September 2019

Fears that first-time buyers scheme will 'drive up prices without boosting supply'

Minister Simon Coveney’s first-time buyers plan bids to tackle the housing crisis. Photo: Tom Burke
Minister Simon Coveney’s first-time buyers plan bids to tackle the housing crisis. Photo: Tom Burke

Michael Cogley

Nearly half of all commercial real estate professionals believe Housing Minister Simon Coveney's first-time buyers scheme will increase the cost of houses across the country but not boost supply, new research has shown.

It comes as details of a Central Bank board meeting show one member of the commission which oversees the regulator tried to hold out against the loosening lending standards in November.

According to a study for Origin Capital, 46pc of property industry professionals believe the scheme will have a negative effect on the industry while 43pc believe it will contribute to higher prices.

Read more: Interview: Big banks' behaviour was just unacceptable, says Governor of Central Bank

The minister introduced the scheme as part of Budget 2017.

It aims to make it easier for first-time buyers to save for a deposit by providing a tax rebate of 5pc on the value of new homes up to a limit of €400,000.

Origin chief executive Ross Metcalfe said the property sector was expecting "considerable change" next year.

"The results also show that respondents believe a number of other factors will have an impact on the industry, including the US election result, markets and political uncertainty, and more local factors including a lack of funding for market activity in Ireland, the proposed tax on overseas property funds, the first-time buyers scheme, and changes to the Central Bank mortgage regulations," he said.

The survey, which was completed by 240 respondents, also found differing views in relation to Brexit.

A fifth of respondents believe the UK will opt for a hard Brexit, while 61pc forecast it will move for a softer approach when it comes to exit negotiations. New funders will be welcomed as 87pc said the level of capital provided by traditional banking institutions to the sector was not sufficient to meet the market's needs.

Meanwhile, official minutes of a meeting of the Central Bank show that one member of the board tried to hold out against the decision to change lending rules by allowing banks to lend up to 90pc of the value of homes to potentially all first-time buyers without a loan amount cap.

Minutes of a November 23 meeting show one member of the commission questioned the need to move the loan to value limit to 90pc from 80pc, and said a more appropriate limit might be 85pc. The member "was not comfortable" with the scale of the change and had reservations about the proposal, the minutes note.

Irish Independent

Also in Business