The new help-to-buy scheme for first-time house-buyers will make housing less affordable, according to a leading estate agency.

The measure provides for a 5 per cent tax rebate on purchases of new homes up to €400,000. However, Savills Ireland said giving people more money to compete for limited new builds would drive up prices and help restore developer profits.

“House-buyers will be no better off because of this scheme – prices will just increase to offset the tax rebate,” Savills’s John McCartney said.

“Some developers may be able to get building, which is a positive. But a more courageous approach focused on cost-reduction would have achieved the same thing, along with more affordable housing.”

Dr McCartney said alternative approaches, such as cutting VAT on new homes, would equally have encouraged development – but at a lower price point.

“However the Government bottled out of that option because of optics – it would simply have looked too much like a handout for developers.”

Announcing the measure, Mr Noonan said pro rata rates would apply to lower-priced houses, while a full rebate calculated on €400,000 would also apply to houses in excess of €400,000 and up to €600,000.

However, he said no rebate would be paid on house purchases in excess of €600,000.