Abolishing the Help to Buy scheme would create uncertainty and damage confidence in the housing market, a report on the scheme has found.
The report by consultants Indecon says getting rid of the incentive now "would likely impact on the levels of new builds".
In the event, Minister for Finance Paschal Donohoe made no mention of the scheme in his budget speech, in which increasing housing supply was a major theme.
There had been pressure earlier in the budget process to close down the scheme. However, as budget day approached, it had been anticipated that the minister would announce plans instead to amend it.
Help to Buy, which was announced in the last budget and came into force in January, allows first-time purchasers of newly built homes or self-builds to claim relief of income tax paid up to five per cent of the price of the property and a cash maximum of €20,000. The properties concerned must be worth no more than €500,000.
Indecon says there were 2,970 applications under the scheme up to the end of August for sums of €42.65 million, including €5.7 million in relation to self builds.
The figure includes some retrospective applications as first-time buyers were allowed to claim for relevant purchases dating back to July 2016.
The Government has budgeted for claims of €50 million a year over the three year term of the scheme.
The average claim, according to Indecon’s figures, was for €14,360. It said that 16.3 per cent of claims were for refunds of less than €10,000 and almost 54 per cent were for sums of less than €15,000.
The report takes issue with certain “deadweight” under the scheme relating to people whose incomes meant they had no need of such support. It also questions whether the loosening of mortgage lending rules by the Central Bank means that some borrowers have less need of the scheme.
Acknowledging that it is still early days for the incentive, it suggests that targeting the scheme “to provide greater support to assist individuals or couples with average incomes to fund deposits may be appropriate”.
A survey of building contractors undertaken by Indecon for the study found that 57 per cent of builders had not increased their prices as a result of the scheme.
Indecon warns that if applications for Help to buy accelerate, it could lead to inflationary pressure sin the sector “if there is not an adequate supply response”.
However, it found no evidence of an impact on the price of homes for first-time buyers as a result of the scheme to date.
It also noted that there appeared to be no “significant overall impact to date on the level of supply”, though it said the time lag involved in the sector meant this was not surprising.
