The unprecedented economic impact of coronavirus and the challenge that presents to the residential property market has prompted a call for the help-to-buy scheme for first-time buyers to be extended to include second-hand homes.
In a letter to the Minister for Finance, Paschal Donohoe, the Institute of Professional Auctioneers & Valuers (IPAV), says there is a "compelling logic" for the provisions of the scheme to be widened as a result of the difficulties presented by the pandemic.
The help-to-buy scheme provides a tax refund to help first-time buyers get the deposit needed to buy a newly-built home or a self-build, up to a maximum value of €500,000. Five per cent of the value of the property, or €20,000, whichever is lower, can be claimed.
Commenting on the situation facing first-time buyers of new homes, IPAV chief executive Pat Davitt says the prospect of incomes being reduced will make it "very difficult to reach the already high threshold of 3.5 times income under the Central Bank macroprudential mortgage rules".
“Covid-19 has also had the impact of lenders adopting extreme risk-averse positions with exemptions to the rules – which are allowed – having all but dried up.”
The first-time buyer’s dilemma could be compounded even further if Construction Industry Federation president Tom Parlon’s warning that housebuilding costs could be driven up by the enhanced safety measures surrounding construction during Covid-19.
Referring to this, Davitt says: “New homes are already selling at between €260,000 and €300,000. With the CIF warning that due to Covid-19 requirements, a three-bed semi could increase by another € 15,000, this would simply put the prospect of owning a new home outside the reach of very many first-time buyers.”
Highlighting the manner in which second-hand homes could help to meet the demand from those priced out of the new-homes market, he says: “Extending the help-to-buy scheme to secondhand homes would enable many first-time buyers realise their aspiration of owning their own homes. It would also have the effect of freeing up some badly needed rental properties for other would-be tenants,” he says.
While Davitt notes that there is a “good supply” of second-hand housing stock across the country within the more-affordable €170,000 to €250,000 price bracket, he suggests the Minister could incentivise their purchase even in the absence of allowing for the full tax relief provided on new homes.
The IPAV chief’s letter notes the “critical importance” of home ownership to the growth in an individual’s long-term personal wealth and points to the decline in home ownership in Ireland between 2011 and 2016. According to CSO data, the number of owner-occupied households fell from 1,149,924 to 1,147,552 in the period, causing the overall home ownership rate to drop from 69.7 per cent to 67.6 per cent, a rate last seen in 1971.
