Effects of ending the help-to-buy scheme

The help-to-buy scheme was designed to help first time buyers buy a home. First time buyers are encouraged to buy property through the help-to-buy scheme by refunds of income tax and deposit interest retention tax paid over the last four years. The help-to-buy scheme allows purchasers to claim a rebate  tax already paid of income up to €20,000 depending on the value of the property.

There is a move to end the help-to-buy scheme. This would be detrimental to the housing market. Figures have shown that more than 80% of all first time buyers are relying on the scheme to buy a home.

However, the scheme is scheduled to end at the end of 2019. The government has given no indication of an extension of the help-to-buy scheme.

According to theBanking and Payments Federation, 84% of new property purchases were made by first time buyers with the support of the help to buy scheme. Furthermore, chief economist, Dr Ali Ugur, claimed that the help-to-buy scheme was important for market stability. It was a key component in helping housing supply increase and helping first time buyers.

Also, new buyers are being pushed out of the market by investors and state purchasers of new homes. Cuckoo funds and state bodies buying of homes has tripled since 2013, when property prices were at the lowest point.

Dermot O’Leary, Goodbury;s Stockbrokers economist warned that uncertainty surrounding the extension of the help-to-buy scheme means that fewer properties will be completed. Also, O’Leary notes that the limited scale of the house builders will further contribute to fewer property completions in 2019.

The scheme is being stressed by the construction sector. The construction sector is stressing that the help to buy scheme remains in place to ensure that there is adequate demand for housing in the market.

Buyers are already challenged by harsh Central Bank rules and regulations to borrowing no more than three and a half times their income, unless buyers qualify for minor exemptions. New buyers are also faced with the second highest mortgage rates in the eurozone.

The Banking and Payments Federation has defended staggering rates because they are regulatory rules imposed by the central bank.

State bodies have also increased their purchase of property. It has been determined that state bodies have bought property in 2018 amounting to a combined  €2.4 billion. This figure resemble 1 in 7 purchases of property last year.

Even though state bodies have increased their property purchases, first-time buyers have increased their share of the mortgage market. Thus, help-to-buy is helping in all areas both Dublin and rural.

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