THE HELP TO Buy scheme has received nearly 7,000 applications to date, but there are concerns there could be a rush of applicants amid fear it’s to be scrapped.
Housing Minister Eoghan Murphy has acknowledged that the controversial incentive is under review, with reports it could be wound up in the next Budget.
The scheme, which was first introduced in last October’s budget, provides first-time buyers a grant of up to €20,000.
Critics of the scheme said it is pushing up house prices rather than encouraging building.
Speaking on RTÉ’s The Week In Politics, Murphy acknowledged that the scheme is something he is ‘looking at’.
We have a review under way at the moment, and I will wait until that review is concluded.
Asked whether or not he was concerned that the initiative might in fact be inflationary, Murphy replied:
It is a concern of mine.
John McCartney, Director of Research and in-house economist for Savills, told TheJournal.ie that any hint the scheme could be coming to an end is likely to “focus the minds” of those who were intending to buy in the months ahead.
He argued that due to limited housing stock on the market and the tight time-frame before the next Budget (when it is mooted to be ending), “the frenzied demand before the shutters come down” could further inflate house prices.
How many have applied?
As of the end of last month, Revenue had received 6,607 applications to Stage 1 of the Help to Buy incentive, of which 4,095 have been approved.
There are two stages involved in the Help to Buy process. The initial application (Stage 1), where applicants provide proof of their mortgage, and Stage 2, the claims stage, where more details and documentary evidence of mortgage drawdown is needed.
However, it is possible that many of the applicants may never make a claim to Stage 2 for a variety of reasons.
These could include individuals who do not go on to obtain mortgage approval, who may decide to purchase a second-hand property, or who are not able to source the new home that they desire.
To date, 1,917 Stage 2 claims have been made, of which 1,376 have been approved.
Boost in summer sales
If the minister does decide to abolish the scheme, there could be a jump in applications in the run-up to the end date as buyers rush to avail of the grant.
While there is usually a lull in the housing market in the summer months, the pressure on buyers to get the grant before it is scrapped could boost sales, said McCartney.
“It will get them moving sooner rather than later,” he added, stating that people who were planning to get on the property ladder in autumn could try to buy in the summer.
McCartney said he has always argued the Help to Buy scheme was “ill-conceived”.
It was always going to be inflationary. If you put more money in people’s pockets and do not increase housing supply, it is going to up the prices.
He pointed out that the minister has not made any concrete announcements about the scheme being shut down, but said he believes it should be.
“It is a misguided policy… it is never too late to do the right thing,” he said.
If it does close, there is likely to be a vacuum in the first-time buyers market, with a possible slow down.
However, McCartney said he would not like to overplay this as due to rapid population growth and the lack of supply, there is still a huge demand in the housing market.
Murphy has said he hopes to focus on initiatives that will boost supply. If the Help to Buy scheme is abolished, other stimulants in the market will be needed, said McCartney.
Scheme on budget
While there had been concerns that the Help to Buy scheme would come in over budget this year, the latest figures show it will largely be in line with the original estimate of €50 million.
Answering a parliamentary question on the issue, the former Finance Minister Michael Noonan said the total estimated cost of these claims to the Exchequer is €20.3 million. A total of €10.1 million represents retrospective claims which were made between period 19 July to 31 December 2016.
Given that the estimated cost for claims approved under the incentive for the first five months of 2017 comes to €10.2 million, Noonan said he estimate the cost of the plan to come in on budget.
To embed this post, copy the code below on your site
have your say