The Government’s tax rebate to first-time buyers of new properties is likely to cost considerably more than previously thought.
Based on the average applications to date, the cost of the help-to-buy scheme so far this year is about €56 million.
When the scheme was launched in the last budget, however, the Department of Finance allocated only €50 million for the scheme for the full year of 2017.
The incentive allows first-time buyers a 5 per cent income tax rebate up to €20,000 on the purchase on a new home.
In response to a parliamentary question posed by Fianna Fáil finance spokesman Michael McGrath, Minister for Finance Michael Noonan said that so far this year applicants had received tax rebates totalling €3.48 million.
This equates to an average rebate of about €15,000. With 3,753 applications pending and on the basis that each applicant would receive €15,000, the cost to the State so far would be about €56 million.
Demand-led scheme
“While it is early days yet, there is a distinct possibility, based on these numbers, that the cost of the Government’s help-to-buy scheme will significantly exceed the €50 million estimate for 2017,” Mr McGrath said.
“Given the way it was set up, as a demand-led scheme, the Government has no control over the final bill. If all the applications in to date were to be approved and the average tax rebate remained at €15,000, the bill would already have reached €56 million in little over two months,” he said.
Mr McGrath said he expected Mr Noonan to publish the independent impact assessment of the scheme as soon as he receives it in September.
“This assessment needs to focus on the impact of the scheme on the price of new houses and apartments and on the supply of new homes,” he said.
Property prices over the next few years are expected to be underpinned by improvement in the labour market; the help-to-buy scheme; and the Central Bank’s recent decision to loosen its mortgage-lending rules.
