Wednesday 12 December 2018

Revealed: First-time buyers use tax refund to purchase €450,000-plus houses

Hundreds 'who don't need it' using Help to Buy to land expensive homes

File photo
File photo
Paul Melia

Paul Melia

HUNDREDS of new homes bought using the controversial Help-to-Buy scheme have cost more than €450,000 each, fuelling concerns the lucrative tax break is benefiting those who don't need help.

Official data shows that one in 20 first-time buyers have claimed a tax refund of up to €20,000 to offset the cost of buying an expensive property, prompting calls for the scheme to be targeted at more affordable homes.

While Help to Buy is designed to help borrowers raise the 10pc deposit needed to secure a home, a quarter of all claims made were to those with a deposit of at least 20pc.

Figures from the Revenue Commissioners also show that more than half of the total properties bought under the scheme were outside the capital.

The figures outline details of the 4,824 claims paid to date and raise fresh questions about whether the incentive is properly targeted at those who cannot afford to buy, or is simply helping inflate prices.

Last September, a report from consultants Indecon for the Government found that while there was no evidence that the scheme was leading to an increase in house prices or new supply, some borrowers who were not in need of support could be availing of the relief.

Housing Minister Eoghan Murphy speaking to the media on an update on the establishment of
Home Building Finance Ireland this week. Photo: Gareth Chaney
Housing Minister Eoghan Murphy speaking to the media on an update on the establishment of Home Building Finance Ireland this week. Photo: Gareth Chaney

The Central Bank and others have said the scheme is having an impact on prices. The latest figures from the Central Statistics Office show house prices rose by 11.6pc in the year to last December.

Sinn Féin's housing spokesman Eoin Ó Broin said he was concerned the relief wasn't properly targeted at those most in need of help. Just 886 claims, or 16pc, were for properties costing €225,000 or less.

"The concern I have is there's a significant number of purchasers who did not need help. Now they're getting a significant tax break. That's money that could be spent in a more targeted way," he said.

"It's clear there are significant numbers of people availing of this generous tax break who don't need it. It would make more sense if there was a tighter price limit, geographically broken down, but I would still worry it would have an inflationary impact on affordable homes."

The 'Help to Buy Statistics 2017' report shows that claims totalling €68.9m have been approved to date for properties purchased or built between July 19, 2016 and January 2 this year. This equates to an average tax refund of almost €14,300.

In all, 12,364 applications for the tax rebate have been received. Of these, some 5,392 claims have been made, of which 4,824 have been approved. Of the 5,392 claims, some 2,052 (38pc) are in Dublin.

The figures suggest that many first-time buyers who claim the grant have managed to save hefty deposits and are buying expensive homes.

A breakdown of property values shows that 965 - or almost 18pc of the claims made - related to homes valued at €376,000 or more. Of these, 279 cost more than €450,000 - just over 5pc of the total claims made. There is no geographical breakdown of where these homes are located.

One in four claimants had a deposit of at least 20pc of the purchase price of the property, while 666 secured a mortgage with a loan-to-value ratio between 70pc and 74.99pc.

The Department of Finance said a cost-benefit analysis would be completed this year. "We expect this will be completed in advance of Budget 2019 so as to allow matters to be looked at again in the light of a greater amount of factual data on, and analysis of, the scheme," it said.

Irish Independent

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