MORTGAGE RELIEF: The Government has increased the mortgage interest relief for first-time buyers of new and second-hand homes in a move designed to dampen down criticism of the abolition of the first -time buyers' grant last month.
MORTGAGE RELIEF: The move, announced in yesterday's Budget, was not unexpected given the furore after the €3,610 grant was dropped.
The current ceiling on the amount of interest allowed annually is being raised by over one-quarter from €3,175 to €4,000 for single buyers and from €6,350 to €8,000 for married couples.
In a further concession, Mr McCreevy extended the period of relief from five to seven years and said some 45,000 first-time buyers would benefit.
The Irish Auctioneers & Valuers Institute (IAVI) estimates that the additional mortgage interest relief will provide a net gain of €5,335 for a married couple spread over seven years, compared with the recently abolished once-off grant of €3,800.
The changes are designed to give an across-the-board boost to the starter homes market, both new and second-hand, whereas the first-time buyers' grant applied solely to new homes. The new concessions will mean that the benefits will be channelled directly to first-time buyers' pockets, rather than being used as an incentive by builders to bump up prices.
However, housebuilders may still be tempted to increase prices following yesterday's announcement that the lower rate of VAT is to rise from 12.5 to 13.5 per cent.
This could possibly increase prices by about €2,000 for a typical €200,000 new home, though many builders are expected to absorb the extra cost given the size of the profit margin currently available and the fact that competition is expected to increase in the new year when a number of high density schemes come on stream in the greater Dublin area.
The IAVI said that, where possible, housebuilders should absorb the 1 per cent increase in VAT.
Investors who have been dominating much of the new apartment market in Dublin in recent months will be relieved the Minister for Finance did not introduce a ceiling on investment mortgage interest relief in an attempt to dampen down sales. Any change here would have given first-time buyers a clear run on many new developments being launched in the city.
The Society of Chartered Surveyors said the high VAT rate would have an adverse effect on the building industry and increase house prices at a time when there was a need for price stability.
The Institute of Professional Auctioneers and Valuers said the budget showed that the Government was completely out of touch with young house purchasers who were the real victims this year. This comes before VAT is increased on building materials.
