Fine Gael leadership frontrunner Leo Varadkar risks causing further chaos in the housing market after pledging to abolish the Help to Buy scheme if it proves to be inflating prices.
Estate agents have claimed that prices could further rise in the short-term as first-time buyers scramble to buy properties amid fears the grant will be abolished, with concerns also expressed that builders could postpone developing new homes until there is certainty over its future.
Mr Varadkar has pledged to replace a key initiative of his leadership rival, Housing Minister Simon Coveney, and use the income tax refund to incentivise older people to move out of large homes.
“It’s already agreed by Government that there will be a review of the first-time buyers’ scheme to see if it’s been inflationary, I want to bring forward that review,” Mr Varadkar said.
“If that review finds it hasn’t been inflationary then it will continue. If the review finds – as some people believe – that it has driven up house prices for first-time buyers, I think it should be phased out.
“I want to use that money for something very particular which is to provide step-down housing for older people.”
The Department of Finance has commissioned Indecon Economic Consultants to review the scheme, which was due to run until the end of 2019.
Mr Varadkar’s comments are in sharp contrast to his position last October when he said the measure not only helped give first-time buyers “an edge” over others seeking to buy homes, particularly investors, but “more importantly” would incentivise builders to increase supply.
Meanwhile, Mr Coveney last night defended his housing strategy. He said if it was proven the scheme was contributing negatively, then a review should be carried out – but added that he believes Mr Varadkar is behind his Rebuilding Ireland programme.
“I am very happy to stand over my housing policies, they are only nine months in and they are already having an impact.
“Michael Noonan has said and I have said that we would review areas where we have changed,” he said.
Mr Coveney also said he cannot support a position “whereby we lock first-time buyers out of the housing market” to try to keep prices down.
“If it’s not having the impact that we want it to have then we’ll change it. But I think at the moment it is having a positive impact,” he told RTÉ News.
A spokesman for the Construction Industry Federation said it was “very concerned” at any measure which might impact on supply. It said the Help to Buy scheme had helped developers secure finance from banks as it showed there were buyers in place, and its removal could impact on output.
The Help to Buy scheme was introduced in Budget 2017 and allows for a tax refund of up to €20,000 for first-time buyers seeking to buy a new home. The latest figures from the Revenue Commissioners show that 6,320 applications have been made under the scheme, where Revenue outlines the relief available to the prospective buyer.
Chief executive of the Institute of Professional Auctioneers and Valuers Pat Davitt said there was “no doubt” prices would rise in the short term amid uncertainty.
“I’d say in the short term it’s going to do that.
“I’d say it’s going to lead to people getting their grant completed, but supply is still the problem. There’s no property to be got, but if they (first-time buyers) can push up the price to get a property it may well lead to that. Anything that causes any uncertainty is unhelpful.”
Housing lecturer Lorcan Sirr said abolishing the scheme if it was found to be inflating prices was the “right move”, but warned that uncertainty could have an impact on supply.
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