Minister for Housing rules out VAT reduction for building of new homes

Darragh O’Brien has not ruled out extending the Government’s shared equity scheme to buyers of second hand properties in the future

Minister for Housing Darragh O’Brien has ruled out a reduction in VAT on new home building, citing concerns around whether the cost of the cut would be passed on to the buyer.

On Tuesday, it emerged that the Government’s Tax Strategy Group is considering the reduction, calculating that it could cost the State €400 million a year.

Builders have frequently called on Government to cut VAT on new home-building to 9 per cent from 13.5 per cent, arguing that this would reduce costs and spark an increase in residential construction.

However, Mr O’Brien categorically ruled this out on Wednesday.


“The interventions that we’ve made now already, we can track the results of them. And I’m much more comfortable with that. I think the measures that we have on the First Homes scheme, on Help to Buy and the other measures are far more targeted and help those who need it, as opposed to across the board. So if I do a reduction in VAT on construction, for argument’s sake, from 13.5 to 9 per cent ... that would apply to everything,” he said, citing someone who could be buying a €10 million house as an example.

Separately, Mr O’Brien has not ruled out extending the Government’s shared equity scheme to buyers of second hand properties in the future.

The shared equity scheme was set up to help first-time buyers bridge the gap between their mortgage and the price of a new home through a joint venture between the State and the three domestic banks, AIB, Bank of Ireland and Permanent TSB.

It involves the State and participating banks paying up to 30 per cent of the cost in return for a stake in the home.

Asked if it could be expanded beyond new homes, the Mr O’Brien said: “I wouldn’t discount it completely. The main focus is about driving supply and on new homes. But it is something that we would keep under review.”

He was speaking at a press conference where he announced that 1,983 home buyers across 24 counties have been approved under the scheme.

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Buyers in Dublin, Kildare, Cork, Meath and Wicklow are the heaviest users of the Scheme. In total there have been close to 5,000 expressions of interest from potential buyers in the first year

Out of the approved cases that have proceeded to sale, around 500 homes have actually been bought.

Asked if supply was an issue, given only 500 have actually secured a property despite the high level of First Home approvals, Mr O’Brien said “supply remains an issue, let’s be straight about that.”

The eligibility criteria was extended in January when the price limit for eligible homes was increased by up to €75,000.

Houses with prices of up to €475,000 and apartments with prices of up to €500,000 are eligible for the Scheme, depending on their location.

The average purchase price for completed purchases is €372,000 with the average support being €68,000 or 18 per cent of the average purchase price.

Mr O’Brien said there had been “a lot of noise” about the scheme originally, which made it difficult to get the plans off the ground, but that he is “proud” of the work done so far.

“It is making a difference. It is helping to transform the environment for first time buyers.”

He said he expects thousands more potential buyers to benefit from it.

Mr O’Brien also said the scheme has been extended to renters who are considering buying their home if their landlord is looking to sell it.

Some 111 renters have expressed interest so far, with 15 applications lodged and 9 approvals issued in the period to July 7th.

The breakdown of counties with the highest level of successful applications include Dublin at 23 per cent, Kildare at 21 per cent, Cork at 16 per cent, Meath at 11 per cent, Wicklow at 8 per cent,

Under the scheme, the Government made €400 million available to facilitate the purchase of up to 8,000 homes over a five-year period.

Mr O’Brien said the scheme will be flexible in that more capital can be added in future.

He told a press conference on Wednesday that there has been “no inflationary impact” on the housing market according because of the scheme, according to the evidence available to him.

Jennifer Bray

Jennifer Bray

Jennifer Bray is a Political Correspondent with The Irish Times