New Incentive for First time buyers of up to €20,000

Good news for First Time buyers of new homes

The key features of the scheme announced in the budget yesterday are as follows.

1. Available for purchases of New Homes only for use as principal private residence.
2. Relief is calculated at 5% of purchase price subject to a maximum of €20,000.
3. No relief applies if price is above €600,000.
4. Relief is available by way of tax rebate of income tax paid over the past 4 years ( does not apply to Usc and Prsi).
5. Mortgage must be at least 80% of the purchase price.
6. If a joint purchase both parties must be first time buyers

Implications

This proposal is subject to legislation and may well have a few hurdles to cross before it becomes law. It is hard to believe that a 5% deposit requirement is consistent with a well functioning market!

Based on the information available the implications of this move are that first time buyers of new houses will only have to save 5% of the purchase price on properties with a value up to €200,000.

This is a dramatic change compared to 10%.

This assumes that the balance will come from the tax rebate and we expect that this will be the case for most individuals qualifying for a mortgage at 3.5 times income and who have worked for a number of years.

The level of savings required to fund a property up to €420,000 will now (if these new rules are passed) only be 10% of the purchase price ( assuming again that the tax rebate is available which we also expect will be the case in most instances)

This is an unusual relief but it will certainly help buyers who are struggling to get a deposit together to buy a new property..

The mechanics of the scheme need to be worked out in terms of how the rebate is going to be available prior to closing .Lenders may accept some form of payment either directly from Revenue on confirmation that a mortgage has issued for a newly built property or perhaps the builder will be paid net of the rebate amount which he in turn can offset against his vat bill- hard to know.

It will benefit all first time buyers of new houses across the country but clearly the biggest winners would be Dublin buyers .

Whether it will help increase the available stock of new homes remains to be seen but we expect it will encourage building.

it will certainly be very welcome for buyers who have competed their purchase since July, who it appears, will now qualify for an unexpected windfall.