First-time buyers are to get up to €10,000 in a tax rebate as part of Government plans to reheat the property market.
Housing Minister Simon Coveney said the grant would only be paid to those buying new homes and said the Help to Buy package, to be announced in the budget, would help tackle the housing crisis in Cork and Dublin.
It is unlikely that the State will take equity in homes under the buyer aid scheme, as operates in Britain.
However, property experts have warned the first-time buyers’ grant will simply drive up the price of new houses.
Mr Coveney, speaking at the close of the party’s pre-Dáil conference in Kildare, said the package would help kickstart the stalled property market. The grant will be targetted at purchasers buying homes valued at between €250,000 and €300,000.
However, statistics from estate agents Sherry FitzGerald show the average home price sale value is currently €400,000. Daft’s second quarter report put the national average asking price at €215,000.
“The majority, particulary in Dublin and Cork, are simply locked out of the market,” said Mr Coveney. “There aren’t houses being built for them and there aren’t houses being built at a price that they can afford. So we need to change that.”
He said the incentive scheme could see the reduction of house prices and improve the capacity of purchasers to buy homes.
“The mechanism for doing it is still being decided with the Department of Finance,” he said.
“I think it will be something of a first-time buyers grant, effectively through the tax system and through a tax rebate system.”
First-time buyers represented around 55% of the property market, he said.
Mr Coveney said a model in Britain was not favoured by the Government. There were problems there recouping financial aid, he said. Any incentive needed to help drive supply, he added.
Rebates for first-time buyers could be in the region of €10,000. This is similar to the Fianna Fáil manifesto which promised a mortgage deposit top-up scheme worth €10,000 per couple, or €5,000 for an individual.
The finance department o said the rebate could be a refund or tax credit for purchases. It would also be backdated to mid-July, when the housing plan was launched. No exact figure for buyers has yet been decided, a spokesman said.
Revenue and the department will also monitor closely the numbers drawing down the rebate and how it is affecting the housing market.
The grant will form part of taxation measures in the budget, set to come to €330m.
However, economist and Daft report author Ronan Lyons questioned the overall value of the grant for the housing market.
“It may not be viable to build, even after this,” he said. “It’s just free money that will get added to the price [of a house], but taxpayers will pick up the cost.”
The small amount would also not be a “gamechanger” for all buyers, he suggested, but could have an impact in areas such as Cork or Galway.
“The benefit of the overall number of builds has to outweigh the cost of the measure,” said Mr Lyons.
Mr Coveney will next week bring legislation to Cabinet to fast-track planning permission for large housing developments.
The scheme will see developments with 100 plus units going straight to An Bord Pleanála, rather than through local councils. Large developments could be fast-tracked within 16 weeks under the proposals.
Mr Coveney will be quizzed by TDs on his housing action plan at the Oireachtas housing committee today.
Crisis not over
-Eamon Quinn and Geoff Percival
The mortgage crisis has not gone away despite a fall in arrears cases, debt experts have warned.
Central Bank figures show the number of home loan accounts in arrears fell to 82,092 at the end of June, down from 98,155 a year earlier.
Mortgage arrears reached a peak in September 2013, when almost 13% of all accounts in the Republic were in arrears for over 90 days. That has now fallen to 7.8% of all accounts.
However, Paul Joyce, senior policy adviser at the Free Legal Advice Centres said banks are avoiding writing down mortgages.
“It has been presented that the arrears problem has been put to bed by restructuring,” said Mr Joyce. “It has not.”
Eugene McErlean, a banking expert who has advised Independent Alliance TDs on mortgage arrears, also said the number of arrears of over two years showed the scale of the problem.
Separately, the Irish Fiscal Advisory Council told the Oireachtas Committee on Budgetary Oversight that €4.1bn more needs to be put aside in the next five years to account for inflation.
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