Help-to-Buy scheme cost set to soar beyond €70m
20pc of buyers availing of Government initiative purchasing homes worth more than €375,000
One-in-five first-time buyers getting State help to purchase a home is buying property worth more than €375,000, new figures show.
The Government's 'Help-to-Buy' scheme is set to cost far more than the €50m suggested by Finance Minister Michael Noonan when it was introduced in Budget 2017.
Based on current applications and amounts paid, the bill for the first three months of the year could be as high as €72m.
The figures come after two separate reports on house prices from property websites Myhome.ie and Daft.ie suggested that prices would continue to rise sharply throughout 2017.
A combination of factors were cited including the Help-to-Buy scheme, a lack of supply, and changes to mortgage lending rules. It led to calls for the scheme to be scrapped.
Data from Revenue Commissioners suggests that the vast bulk of successful applicants are seeking help buying a home in Dublin, the Dublin commuter belt of Meath, Wicklow and Kildare, and Cork, where prices are highest.
In 13 of the 26 counties, the number claiming the tax break is so low that Revenue cannot provide data for fear of identifying the homebuyer.
The Help-to-Buy incentive statistics, published by Revenue and which cover three months to March 30, also show that of the 1,006 claims made to date, 203 - or just over 20pc - are for properties costing €375,000 or more.
Meanwhile, 77 claims relate to new homes costing more than €450,000.
Revenue data also shows that just over 18pc of successful applicants had saved a deposit of at least 20pc towards the cost of their home.
Housing Minister Simon Coveney defended the scheme, saying it was turning "notional demand" for new homes into "actual demand" on the ground.
"There is no quick fix for supply but all the indicators show that it is responding well to increased demand," he said.
"Our most recent activity report indicates that commencement notices in the 12 months to January 2017 are up 44pc year on year, completions to January 2017 year on year are up 18pc and planning permissions to the end of 2016 are up by around 20pc.
"The truth is that people who are saying the Help-to-Buy scheme for first-time buyers is driving up house prices, I think maybe they haven't looked at the numbers involved.
"About 2.5pc of house purchases at the moment are first-time buyers buying new homes. That is all. So it is hardly driving up house prices throughout the country."
The incentive is designed to help first-time buyers secure the necessary deposit to allow them to secure a mortgage.
It allows for a refund of income tax and DIRT paid over the previous four years, and up to 5pc of the purchase price of the home can be claimed, with the relief capped at €20,000.
Applicants who purchased a home between July 19 and December 31 last can purchase a home valued up to €600,000, with a maximum relief of €20,000.
For homes purchased from January 1, 2017 the maximum value is €500,000.
Fianna Fáil's environment spokesman Barry Cowen said the Government should have focused on reducing building costs by slashing VAT and levies on new builds, as well as securing affordable finance for developers.
"Unfortunately this is as we predicted. This was the fear everybody had about the scheme," he said.
"It might have worked if it was done alongside supply initiatives but they chose to focus on demand. It was merely seeking to create demand which leads to greater prices and profits."
Experts believe at least 25,000 units are needed each year for the foreseeable future just to keep pace with demand and to stabilise prices, but fewer than 13,000 were delivered in 2016.
An analysis of the Property Price Register shows that the number of property transactions taking place in the first quarter of this year is down 14pc to 8,061 compared with the same period of 2016.
However, while the number of transactions is dropping, house prices nationally increased by some €16,500 over the past 12 months, up 6.9pc.