Sir, – To suggest that “incentives that are driving the behaviour of buyers and developers and injecting a boost into the market that is going to be hard to withdraw without causing upheaval” is somehow suggesting that something not quite right is currently going on in the new homes market and negative equity will follow (Cliff Taylor, “Are first-time buyers now financially exposed in the market for new homes?”, Opinion & Analysis, January 27th).
In my view, to also suggest that it is encouraging development in the wrong places does not take account of the viability challenges that exist in the new homes market even with the incentives that currently exist.
While new house prices did rise at a faster rate than existing homes in the last year, the same CSO data that your columnist links to in his article shows that since 2016 (the year the Help to Buy scheme was introduced) new house price increases have actually lagged behind the second-hand market. The consensus is that increased supply is the key to solving the housing crisis and in 2015, the year before Help to Buy was launched, new house completions stood at less than 13,000 units. In 2023, while still well short of the level of completions required, completions have now increased to 33,000, and this increased supply has been in part facilitated by the introduction of these critical Government initiatives which are a vital support to the younger generation who dream of getting on the property ladder and owning their own home.
A first-time buyer of a €400,000 home is paying VAT of €47,577 while the Help to Buy grant amounts to €30,000 (which is a refund of tax paid). The net benefit to the taxpayer is €17,577 in this situation. There is no mention of VAT in Cliff Taylor’s article and there is zero VAT in the North of Ireland, UK and many other European countries on new homes. If, as suggested, political change will mean an end to these incentives, I can assure your readership that a lot more home buyers will need State-supported housing which comes at an enormous cost to the taxpayer. Your columnist notes that the removal of these incentives would be one way of lowering prices, but that ignores the negative impact it may have on the delivery of new homes.
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Right now, there is no question of new home prices falling as they simply won’t be viable to build, and are currently being provided at minimum cost to enable developments to be funded. You simply will not get new homes for the first-time buyer market of any scale. In addition, to suggest negative equity will follow where new home buyers receive the Help to Buy and First Home Scheme is to suggest that these purchasers will be trading in the short to medium terms which is definitely not the case in reality. Instead, what will happen is that a whole generation of younger people will be denied the opportunity to purchase a new home and get on that vital first step of home ownership. – Yours, etc,
MICHAEL O’FLYNN,
Chairman,
O’Flynn Group,
Ballincollig,
Cork.
