Brexit and Help-to-Buy Scheme Provide Uncertainty

Boris Johnson has recently been elected Prime Minister and uncertainties surrounding Brexit are back on the minds of Irish people. The likelihood of there being a no-deal Brexit is strong and the Irish housing market needs to be ready for the consequences. Also, the uncertainty surrounding whether the help-to-buy scheme will be continued or not will have a strong effect on the housing market. The Irish housing market for the rest of this year will depend strongly on the outcomes of the two events listed above.

Lisney published a report recently focusing on the upward trend in the Cork house and construction sectors. Lisney cited Brexit and help-to-buy scheme as two possibilities that may negatively affect the Cork market. Lisney investigated 41 new home schemes being constructed in the Cork area which totals 2,640 units. The help-to-buy scheme is what’s keeping first time buyers able to purchase a home and if this is taken away the number of people seeking homes will decrease. New home sales contribute to approximately 15% of sales in Cork over the last couple of quarters …

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The Future of Help to Buy Scheme

The help to buy scheme is set to be extended past the original deadline of the end of this year. The help to buy scheme grants money to first time buyers to help and encourage them to purchase their first homes. Currently, the grant gives up to 20 million Euros, but the government Finance Minister Paschal Donohoe signaled strongly that this program will be extended.

Mr. Donohoe said that the grant had, “a very valuable role in supporting the purchase of homes across last year and this year in particular.” The rising house prices in Ireland has caused many young buyers unable to attain mortgages to buy a house and this initiative mainly targets younger couples.

Some complaints with having a help to buy scheme is many people view it as being a subsidy to developers. The payment that the government is giving to buyers is subsequently being paid to the developers. This can encourage them to keep prices raised and not provide a decrease in demand causing prices to lower.

Mr. Donohoe is currently consulting with Housing Minister Eoghan …

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A construction agency has seen a boom in business since the Help-to-Buy scheme

Abbey, a property developer, has high hopes for the Irish housing market.

They are seeing huge gains as the house prices keep increasing. They are especially reaping the benefits from the Help-to-Buy scheme. That’s why they are against the review of the scheme.

The intention of the Help-to-Buy scheme was to encourage first-time buyers and to speed up new supply of houses. It can give first-time buyers up to €20,000 in tax rebates. The scheme, instead, has apparently increased home values than raise supply of new homes. This has raised concern for the Minister for Housing, Eoghan Murphy, which brought up the review of the scheme.

 

The Central Statistics Office published on Tuesday that the Irish housing prices went up by 11.9 percent in May from the previous 12 months, driven by a 12.8 percent increase outside of Dublin.

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Mortgage approval rates are surging

The amount of mortgages approvals increased by a third last month. The vast majority was first-time buyers.

With mortgage approval rates increasing, we can expect property prices to keep rising.

The Banking and Payments Federation figures also showed the amount of the approvals is increasing.

A reason for rapid increase could be from Eoghan Murphy, the Housing Minister, reviewing the Help-to-Buy scheme. This review is a result of the Help-to-Buy scheme being accused of inflating house prices.

The increase of approvals does not mean an increase in mortgage drawdowns, as finding a home increases in difficulty. With the housing shortage, houses for sale have multiple offers so you have to outbid the others.

Forecasts predict mortgage lending to go up from €5.7 billion last year to €7.5 billion this year. Within the next three years it might even reach €13 billion.

Mortgage approvals were up from 3,046 last May to 4,124 this May. That makes a 35 percent increase in a year.

We can expect to see an increase of competition among mortgage lending banks with lower interest rates or …

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