The Help to Buy Scheme

The Help to Buy (HTB) scheme is an incentive for first time property buyers. The scheme helps individuals with deposits needed to buy or build a house or apartment. The incentive is that the scheme will give individuals an income tax and deposit interest retention tax (DIRT) refund. This refund extends up to four years of income tax and DIRT tax paid in Ireland in arrears. The incentive has a limitation to a maximum of 5 percent of the purchase value of a home up to a value of €500,000.

To qualify for the scheme, individuals must be first time buyers. The property bought or going to built must be newly built with the construction subject to the value added tax (VAT) in Ireland. The requirements of the Help to Buy scheme also involves taking out a mortgage on the property with a qualifying lender. The loan to value ratio must be at least 70%. This loan to value ratio denotes the percent of the loan that covers the purchase value of the property.

The scheme is estimated to contribute about 80 percent of first time buyer property purchases since it was enacted in 2017. However, housing sales are still behind the increasing supply of homes. Thus, unsold stock of homes have increased. Due to unsold housing stock this year, construction of homes will likely slow in the later half of 2019 in comparison to forecasted building.

The likely slowing of increase of supply of homes is detrimental to the housing crisis. Most first time buyer transactions are backed by the help-to-buy scheme. The scheme was planned to end this year, however this may also have negative effects on the housing market. The help to buy incentive has comprised of a majority of property sales.

However the scheme is causing forecasted home completion units to decrease. Originally, this year home completion was expected to be 35,000 additional units. This prediction has fallen to 21,000 units. The decrease in supply of completed homes means that supply of homes has fallen short of the demand for homes by 22,000 units.

Major issues remain in the Irish housing market including pressures from demographic trends, the governments dependence on the private rental market for increasing supply of homes and affordability constraints are increasing the cost of rent. The housing crisis will likely worsen as more first time buyers will be unable to purchase a home with out the help to buy scheme that has been planned to end this year.

 

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