Concern about Impact of help to buy scheme

12 March 2018
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The help to buy incentive was introduced as a measure to assist first time buyers in buying new homes and apartments. The scheme provides a tax rebate of up to €20,000 towards the cost of buying new home, subject to a limit of 5% of the purchase price.

On the face of it the scheme looks like great news for hard pressed home buyers. Buyers struggling with high rental payments could not save the deposit requirements especially when the Central Bank rules resulted in very high deposit requirements for Dublin purchases in particular. But the Central Bank in fairness,relaxed these and allowed buyers borrow up to 90%.

We have noticed that second hand properties in close proximity to new housing developments appear to be priced significantly lower than the new houses.

We believe that there is a danger that the new house prices are being inflated by the extra demand from buyers who now qualify for a 90% mortgage facility plus a 5% rebate, meaning they only need to save 5% of the purchase price to buy their new home.

While there is better value in nearby second hand homes, it could take first time buyers a couple of years to save up the deposit difference and with house prices rising the lure of the new house is winning out.

Changing the help to buy scheme should be given serious consideration if the net effect is to artificially drive up house prices.

Some research should be undertaken to establish if prices are being inflated for the reason stated above.

We need to remember that house prices may not continue to rise and there are significant risks coming from Brexit and the US policies that may impact on our economic fortunes.