Budget 2017 is a missed opportunity
Each year the Budget looms large on the property market horizon with much speculation amongst market participants as to its likely effect on their particular property perspective. For weeks in advance uncertainty creeps into the market as everyone contemplates the mooted predictions.
Sellers wonder will the value of their house rise once the Budget has come and gone and buyers pause to see if there will be any pleasant surprises to help them on their way. The effect often results in the market stalling briefly and then returning to normal shortly thereafter when the monetary dust settles.
This year the much-discussed assistance for first-time buyers was well flagged, and was no doubt welcomed by many.
The macro-prudential rules introduced by the Central Bank in 2015 successfully halted the hyper-inflation of residential house prices emerging most notably in our cities. These rules effectively anchored house prices to affordability and income for many and ultimately the residential market is now more stable as a result.
Nevertheless the requirement to save a substantial deposit was a massive hurdle for many first-time buyers who were already paying record high rents and taxes. So Tuesday's announcement was a welcome break for many who presumed buying a house was a distant prospect. Confining the assistance to the purchase of new homes was, however, a missed opportunity.
The supply of new homes cannot be increased in any significant way overnight. In May, the Government pledged to provide 125,000 homes by 2021, or 25,000 new homes a year; this year, however, only about 14,000 are expected to be completed. Given the shortage of new homes, limiting the assistance to this category is likely only to increase demand and therefore prices as the stock levels are so low. Including secondhand homes for a limited period whilst the supply of new homes increase would have had a more meaningful impact for the first-time buyer.
In order to encourage the developer to provide the supply, reducing the cost of construction may have been more impactful and one obvious way to do this would have been to reduce VAT on new homes. These measures combined would have provided more bite to tackle the enduring problem of supply and demand of homes in Ireland.
- David Byrne is a director of Lisney estate agents