The help-to-buy scheme for first-time homeowners is set to be extended beyond the end of 2021 in the upcoming budget, Tánaiste Leo Varadkar has said.
Mr Varadkar’s comments follow reports on Monday that house prices have risen by 9 per cent on average over the past year.
Help-to-buy allows those buying or building new homes for the first time to claim relief of income tax and deposit interest retention tax (Dirt) paid over the previous four years up to a maximum of €30,000 or 10 per cent of the purchase price of the property.
The scheme is due to expire at the end of the year.
Property price website MyHome.ie, which is owned by the Irish Times, has said the average asking price in the year to September rose by 9 per cent to €308,000.
In Dublin the increase was 7.3 per cent to €414,000 while in the rest of the country, asking prices rose by 10.1 per cent on average to €206,000.
Mr Varadkar said the increase in house prices is “unwelcome, particularly for people who are trying to buy a home for the first time or maybe want to upgrade because they have a growing family”.
Asked if there will be an extension of help-to-buy in the budget he replied: “Help-to-buy is there, and it’s going to remain in place for a little bit longer.
“There’ll be an announcement on budget day on the detail of that — but it is going to remain in place.”
Mr Varadkar added: “While some people criticise it as a measure that can cause house price inflation, I think most people will see it as a measure where people get their taxes back, and they can put that towards their deposit.”
He said the scheme has helped more than 20,000 people “to get that deposit together and buy their first home and I think that’s why we would intend to retain it for a little bit longer”.
Mr Varadkar said there are a number of factors contributing to the rise in house prices saying: “Because of the pandemic there have been a lot of savings and more people have a deposit than was the case before.
“We also saw a decrease in construction during the pandemic, and we’re seeing an increase in building materials.”
He also included a greater willingness to live in rural areas in the factors driving the increase.
Mr Varadkar argued that the Government’s Housing for All plan offers a solution. He said the “major ramp-up in investment in social housing” will provide homes for people on the housing list freeing up properties for others to rent or buy and “that can help to contain prices”.
Mr Varadkar also said changes to the Local Authority Home Loan Scheme will make mortgages affordable for more people.
He also said the plan includes action to help increase the supply of private housing “which is essential because without supply we won’t see prices moderate or fall”.