No change to Help to Buy incentive for first-time buyers
Buyers of new homes will continue to benefit from 5% tax rebate until the end of 2021
There will be no change to the Help to Buy initiative, and first-time buyers of new homes will continue to benefit from the tax rebate in its current form until the end of 2021. This means that buyers will continue to be eligible for relief of up to €20,000 on the purchase of a new home worth up to €500,000.
Minister for Finance Paschal Donohoe said extending the scheme in its current form would offer “certainty” to first-time buyers, and follows fears that the Government would recalibrate the initiative to better target buyers at the lower end of the income scale by reducing the upper purchase price limit. There had been an expectation that the Government would cut the upper purchase price limit from €500,000 to about €400,000/€450,000.
Since its launch in April 2014, more than 32,000 people have applied for Help to Buy
Mr Donohoe’s decision to leave the scheme as is, however, follows strong lobbying from the property sector, which argued that the incentive is necessary to maintain activity levels.
Marie Hunt, executive director and head of research at CBRE Ireland, approved the decision.
“We welcome the fact that sense has prevailed regarding retention of the Help to Buy scheme for a further two years, being that this scheme has been instrumental in helping deliver much-needed housing supply in recent years,” she said.
Annette Hughes, director at EY-DKM Economic Advisory, said the extension of the scheme “will alleviate current affordability constraints for buyers in the main urban locations”.
Since its launch in April 2014, more than 32,000 people have applied for Help to Buy, although less than 15,000 of these claims have actually progressed to draw-down. The scheme works as a tax rebate, which allows putative first-time home-buyers to claim a refund of income tax (but not USC or PRSI) and deposit interest retention tax (DIRT) paid in Ireland over the previous four years.
Buyers can claim 5 per cent of the purchase price of a new home (or 5 per cent of the completion value of a self-build) up to a maximum of € 20,000. This means, for example, that if you buy a home worth €350,000 between now and end-2021, you will get €17,500 towards the cost of your deposit.
One of the big criticisms of the scheme has been that it encouraged developers to build homes in the more expensive €300,000 to € 350,000-plus category, with little activity in the more affordable price ranges, and for helping those on higher incomes, who would otherwise have been able to purchase without the help of the scheme, buy their first home.
Latest figures from Revenue show that Government had spent about €215 million incentivising first-time buyers through the scheme as of September of this year. However, while about 20 per cent of this has gone to help those who are buying a house for between €400,000 and €500,000, it has spent less than €15 million supporting those who are buying houses for €200,000 or less.
Moreover, more than a quarter (26 per cent) of those who have availed of the scheme were able to buy their new home with a deposit of between 20 and 30 per cent.