First time home buyers face hike of up to €10,000 under State tax plan

FIRST time buyers could face a hike of up to €10,000 on the cost of a new home in the coming months, adding to the huge tax burden they already bear on entering the housing market.

Matt Gallagher, chairman of the Irish Home Builders Association warned the new tax was being plotted by local authorities around the country and if it becomes a reality it will add further to the massive pressure young people face when trying to get on the housing ladder, he said.

Already the State takes €92,260 in taxes on a new home costing €250,000.

That is 37% of the total cost and of that 13.5% is made of VAT which amounts to a sizeable €33,750.

Mr Gallagher said “when the finger of suspicion points at the building industry people ought to look more closely at the kind of money being filched by the government on every purchase the first time buyer makes in this market.”

And if they have their way that situation will be made substantially worse in the period ahead, he said.

The new threat has emerged as Local Authorities prepare their development contribution schemes, a requirement under the Planning and Development Act 2000.

In an era of shortages in Local Authority funding, Authorities may be tempted to seek higher capital contributions than may be necessary to facilitate housing developments taking place.

Extreme contributions should not be levied on an already overtaxed housing sector, said Mr Gallagher.

If the current plan is activated the end result could add a further €6,000 to €10,000 on to the cost of the purchase of a first time buyers home, warned Mr Gallagher.

Many local authorities, for example, are proposing to substantially increase their levies in the coming months which will be a significant addition on to the cost of each new housing unit, he said.

Unnecessary delays in the planning system are leading to increased costs, increased prices and further delays in completions of housing units for sale.

All of the above deserve strong political action with a view to controlling costs, he said

If Councils around the country proceed with plans to dramatically increase development levies, the end result for first time buyers will be very severe, he warned.

Increasing the supply of zoned and serviced land is critical to meeting housing needs.

Trying to control the market for development land through legislation is not likely to be very successful, he said.

The focus of attention should be on creating an adequate supply of zoned and serviced land, he said.

In the current environment where couples ar struggling affordability is a critical issue for increasing numbers of people, he said.