The Government’s Help-to-Buy scheme was already damned as a throwback to the disastrous interventions of the past before it was introduced in October’s budget. Critics maintain the 5 per cent tax rebate for first-time buyers will only fan further demand, which, in the absence of an adequate supply, just produces more inflation. They’ll point to yesterday’s property numbers as fresh evidence of this acceleration.
However, such a proposition becomes a tad shaky when you consider the size of the market involving first-time buyers and new homes. During the first 10 months of 2016, just 850 first-time buyers bought new homes. In the context of a market that generates about 37,000 transactions a year, this is a drop in the ocean, and hardly likely to turn the dial on inflation.
That said, Government policy can shift sentiment. There is anecdotal evidence that some estate agents raised prices on all their properties by 10 per cent on the day of the budget.
You may be minded to ask why the Government’s main policy measure is focused on such a small cohort of potential buyers when the property problem is so systemic. Perhaps it wishes to tread carefully given previous interventions backfired so spectacularly. However, the real reason is probably political, namely it needs to be seen to be doing something rather than nothing even if the impact is minimal.
If 1,000 first-time buyers receive a €20,000 tax rebate this year it would only cost the Government €20 million, money that could probably be found down the back of the Leinster House couch.
However, if the Government is really convinced of the need to intervene in the market it should do so in a more meaningful way rather than fiddling at the edges.
Most experts believe supply could be bolstered without fanning prices through a site tax aimed at those hoarding land, but such a measure is not scheduled to be introduced until 2019.
Brexit and Trump aside, the supply of affordable homes ranks as one of the biggest potential obstacles to attracting more foreign direct investment to the State. So far the Government’s response has been tentative at best.
