Fianna Fáil remain opposed to first-time buyer measures announced in budget

Fianna Fáil remain opposed to first-time buyers’ grants going towards the purchase of new €600,000 homes, saying the budget measure is “mad” and “off the wall”.

Finance Minister Michael Noonan this week was forced to overhaul the grant scheme, after it emerged the required minimum loan-to-value ratio would force first-time buyers to borrow more.

Following an intervention by the Central Bank, the loan-to-value threshold to avail of the grant is being reduced from 80% to 70%.

The changes were part of the Finance Bill published yesterday, which outlines for legislative purposes the measures decided annually in a government’s budget.

Central Bank governor Philip Lane informed Mr Noonan of his concerns about the grant by letter. The grant will be given to buyers as a tax rebate.

The bank had said that “a sizable number of first-time buyers take out mortgages with a loan-to-value ratio of less than 80%”.

Mr Lane warned that buyers with larger deposits would be under pressure to increase loans to 80% to avail of the grant under the proposed terms.

Confirming the changes, Housing Minister Simon Coveney said it would ensure people do not overborrow. He also said the Government will now consider calls to reduce the value of new homes where people can claim the grant.

Fianna Fáil described the threshold of €600,000 as a “mansion grant”. Housing spokesman, Barry Cowen, went further yesterday and said giving buyers at this level a hand was “mad” and “off the wall”.

He said the €50m grant fund should go to “those who need it most” and that €400,000 should be the limit. Costs could be reduced for buyers elsewhere if Vat was lowered on new builds, he said.

Mr Cowen and other deputies are expected to raise their concerns about the ‘mansion grant’ when the Finance Bill goes to committee stage and before it returns to the Dáil.

Sinn Féin’s Pearse Doherty said, even with the revised rules, that the ‘help-to-buy’ scheme is a “gimmick”. The grant has already resulted in a surge in property prices on websites such as Daft.ie, he claimed.

Elsewhere, as expected, the Bill provided for a clampdown on foreign investors avoiding paying tax on property purchases here.

Vulture funds will be taxed at 20% on the profits they make on property investments.

Funds must deduct a 20% withholding tax on profits made by these non-resident investors.

As expected, this included amending the tax treatment of so-called Section 110 companies.

Sinn Féin says the foreign vulture funds will still be able to escape capital gains tax by holding onto the assets for a number of years.

“As the Government close one door, they leave another open,” said finance spokesman Pearse Doherty.

Under the Finance Bill, tax evaders have also been given six months to get their affairs in order in relation to offshore assets.

Settlement deals or negotiating down sanctions relating to offshore assets will no longer be allowed.

The new rule will come into effect on May 1, even for people who make voluntary disclosures to Revenue.