The State’s scheme for helping first-time buyers to bridge the gap between what they can pay for a home and the price of a property has been “playing catch-up” with rising house prices.
Michael Broderick, the chief executive of the First Home Scheme (FHS), made the remarks as he provided an update on its work in 2022 – including how an increase in house prices meant price ceilings under the initiative had to be raised.
Applications by some 750 buyers have been approved since the launch of FHS last July with the value of the State support sought coming to €57.6 million.
The average purchase price for homes already bought under the scheme is €370,000 with the average level of support provided by the State in the form of shared equity coming in at €71,000 or 19 per cent.
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The average level of State support in Dublin was €11,000 higher at €82,000.
Sixty-eight per cent of approvals were across Kildare (202), Dublin (194) Meath (57) and Wicklow (56) with another 15 per cent in Cork (112).
First-time buyers must have mortgage approval with a lender participating in the FHS and a minimum deposit of 10 per cent of the purchase price.
They must be buying a new-build home and they can apply for up to 30 per cent of the market value of the property, though this is reduced to 20 per cent if they are also availing of the separate Help-to-Buy scheme.
The scheme is also open to certain other eligible homebuyers like people who have are divorced or legally separated.
There are price ceilings for properties that can be bought under the scheme that vary by county and property type and these are reviewed every six months to reflect changes in property prices.
Changes were made from January 1st which increased the price ceiling for houses that could be bought under the scheme by €25,000 up to €475,000 in Dublin, Cork City and Wicklow.
Price ceilings for houses were also increased elsewhere in the country.
The price ceiling for apartments across the four Dublin local authorities and in Cork city was left unchanged at €500,000.
On the recent changes Mr Broderick said: “We’re playing catch up here with the prices – we’re not actually setting them, the market is setting them.”
He added: “There’s no point in having a scheme if it can’t be availed of by people or individuals.”
Asked if he expects a further increase in the ceilings when they are reviewed again in June, he replied: “It’s impossible to say at this point in time because, as we know, there’s been a lot of fluctuation in house price inflation over the last 12 months.”
On any future increases to the ceilings Minister for Housing Darragh O’Brien said: “It’s not the sky’s the limit.”
He said the €400 million scheme will be managed “very prudently” and reviews of the price ceilings will be “evidence-based”.
Mr O’Brien also said the FHS is “a real mechanism to help a lot of the ‘generation rent’ to be able to buy their home whilst not adding to their debt”, that it has been managed “very well so far” and has had “a really good start”.
He said he does not think that Ireland has “turned the corner yet” on rising house prices amid increases last year and a forecast by stockbrokers Davy that house price inflation will be 4 per cent this year.
Mr O’Brien said there has been about a decade of “very significant undersupply in housing” – both private and social homes – and “no affordable housing to speak of”.
He said the overall Government target for the supply homes in 2022 – 24,600 units – has been exceeded which he said is a “good start” but “we need to do more than that”.
Mr O’Brien listed a series of initiatives like the Affordable Housing Fund and the Land Development Agency delivering its first homes that will help with affordability but said: “None of us can say exactly when we’re going to see a levelling off or a reduction in house prices.”
He added: “I do think this year the inflationary environment around housing should decrease.”
