Monday 23 September 2019

Help-to-Buy overhaul set to close door on Dublin new builds

Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins

Michael Cogley

A major overhaul of the Help-to-Buy scheme could result in newly built Dublin homes effectively being excluded from the State grant.

The Sunday Independent understands that Finance Minister Paschal Donohoe is considering reducing the property value cap for the grant to as low as €250,000.

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The move would mean that first-time buyers would be effectively priced out of the Dublin market.

Under the scheme, first-time buyers of new homes can claim a tax rebate of 5pc of the value of the property up to a limit of €20,000. Only homes valued at €600,000 or less currently qualify for the scheme. Since it was introduced in April 2017 the tax incentive has cost the State €196.2m. In its first year, the scheme cost €85.1m.

It was widely criticised for being inflationary toward housing prices. However, industry voices praised its introduction for improving the viability of new homes.

The Revenue Commissioners have drawn up a number of scenarios where the value of homes that qualify for the scheme is lower.

Reducing the maximum value of suitable homes to €400,000 would cost the Exchequer €60m a year, resulting in an annual saving of €25m.

But such a reduction would effectively omit new homes built in many parts of Dublin.

The average price paid for a new home in Dublin city last year was €525,901, according to the Central Statistics Office. In Dun Laoghaire-Rathdown, that figure rose to €648,512.

If Mr Donohoe opts to limit the scheme to homes below €300,000 or €250,000, it would result in an annual cost of €25m and €10m to the State respectively. Either situation would ensure that no new homes built for sale in Dublin would qualify.

Construction Industry Federation director general Tom Parlon warned the Government against cutting the scheme in its entirety, suggesting it would be "nuclear".

He said he would have "no problem" if the scheme was capped at €400,000 but insisted that it was "essential" for homes below that level.

The move follows a week of controversy for the Government over the cost of renting in major cities which is preventing first-time buyers from saving for a mortgage. Fine Gael also came under fire for its reaction to the rising cost of student accommodation.

Education Minister Joe McHugh suggested students should consider "regional options" if they couldn't afford to go to university in Dublin, Cork and Galway.

Meanwhile, Minister of State for Higher Education Mary Mitchell O'Connor said school leavers could use their college grants to cover the increasing cost of student accommodation.

Fianna Fail accused Ms Mitchell O'Connor of having a "let them eat cake" attitude to the cost of third-level education for students and their families.

Taoiseach Leo Varadkar recently called on the Central Bank to loosen strict mortgage-lending rules to help young couples who cannot afford to pay rent and save for a mortgage.

Under the Central Bank's rules, potential homeowners can apply for a mortgage that is three and a half times their annual salary.

First-time buyers are also required to have 10pc of their deposit saved while second and subsequent house buyers have to have 20pc.

The Taoiseach said: "I do think one aspect of mortgage rules that is very tough is that you are expected to show you are saving at the same time you are renting. But of course if you didn't have to pay a rent of €2,000 a month you would be able to save.

"I know the Central Bank is independent, I know it's going to look at these things, but as supply increases I hope that they would consider changes in that area so that people can get out of that rent trap and be able to buy."

Sunday Independent

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