Let's imagine you are a 30-year old couple, working in teaching and nursing, and you want to buy a house.
To save on rent, you moved back with your parents and have managed, somehow, to put together €50,000. The bank will lend you €300,000.
Your preference is to be a bus ride from work but newly built houses where you live start at the impossible price of €600,000.
Last year, the auctioneer took a home off the market and you later learned the council bought it for a social housing tenant. Earlier this year, you were outbid by a cash buyer.
Desperation is setting in.
At a newly built housing estate 50km away you are told by the auctioneer that you should move and bid quickly.
They built 100 houses, only three are still available, and investors have bought most of the homes and some have been put aside for social housing.
The auctioneer explains that the developer bought the land 10 years ago and it took eight years to rezone and to secure planning permission.
The builder would have built the houses 10 years ago if it could have.
The builder paid a development levy of €30,000 to the county council and was charged Vat at 13.5%, on top of the selling price.
The builder estimates that government interventions have added about €70,000 to the sale price.
You ask the auctioneer why they are not building any starter homes in the high demand areas: All the new houses and apartments seem to be around €600,000, way beyond what your combined pay allows you to borrow.
The auctioneer says it is to do with the price of land, the difficulty in getting planning permission, as well as paying development levies.
You have plenty of time on the hour-long drive home to discuss matters.
As a couple, you appreciate that you are fortunate to be both working and able to buy a house in the first place.
What you can’t understand is why you are expected to commute two hours a day.
You puzzle over the reasons the local authority — directly and indirectly — is also bidding on some of the houses where you work and grew up.
But isn’t the government introducing a shared equity scheme to help couples like to get on the housing ladder?
There is some bad news. This is not a shared equity scheme.
It is another mortgage on top of the €300,000 home loan mortgage.
If the government really wants to help first-time buyers, it could start by incentivising builders to build starter homes instead of building very expensive homes.
It would be a start by reversing the advantages that investors have over first-time buyers.
Removing the 13.5% Vat on starter homes bought by owner-occupiers would be a good start.
Then it could abolish development levies on starter homes and then replace the tax incentives for investors in residential property.
It could also impose a temporary 10% stamp duty on all investors to give first-time buyers a break and examine the role councils play in high-demand areas.
Instead provide housing for two families for the same money in lower-demand areas.
- Brendan Burgess is founder of the consumer website askaboutmoney.com