The abolition of the first-time buyer's grant means many young buyers will end up even deeper in debt, writes Conor Lally
Thousands of would-be homeowners around the country were left with a €3,800 hole to fill in their budgets after Finance Minister Charlie McCreevy announced in the Estimates that the first-time buyer's grant was to be axed. In reality, the scrapping of the grant will not result in the abandonment of many planned house purchases. However, for those planning to use the monies in the traditional manner, to begin furnishing their new homes, a Plan B is now required - and fast.
After a decade of runaway property inflation and with prices continuing to rise steadily, many already over-stretched borrowers will have little choice but to run up even more debts to replace the funds the grant would have offered.
Niall Conlon is one such individual. The 28-year-old bank official from Rathfarnham, in Dublin, six weeks ago paid a booking deposit on a two-bedroom apartment in Swords, Co Dublin. The deal was delayed as queries went back and forward between his solicitor and the builder's solicitor, he says. Because of that, the contract on his new home had not been signed before last Thursday, the cut-off date for eligibility for the grant.
"It all came as a bombshell," he says. "There was no warning at all that this was going to happen. It just came completely out of the blue. Obviously like everyone else I knew certain cuts would come with the Budget but not this. Ireland is now so geared towards home ownership that I was very surprised the Government decided to abolish the grant."
The loss of the €3,800 payment he had been expecting will not scupper his plans. But he is now facing into a very difficult period financially for the next 12 months.
"When I got my mortgage approval the grant was tied into it, I was counting on it. I was going to use it to get started in the house, to buy things like carpet and furniture."
But now a further loan from his credit union will be required.
"I was already very stretched and this has just made things worse and has meant that I have to get into even more debt. It's an extra worry on top of everything else. And when you are buying a place on your own and paying today's prices, it's tough."
He says that while the anger surrounding the abolition of the grant may be forgotten by most people by the time the next general election comes around, he is determined that it will influence the way he votes.
"The price of everything in this country is going up, but the one thing that's not is my wages. And it seems very convenient to me that this has been scrapped just a few months after an election."
Elaine O'Brien is in much the same position as Conlon. The 19-year-old Dubliner is currently buying her first home in west Dublin with her partner, Stephen Larkin. Both have been saving hard in recent months. The young couple's relative youth means their earnings are not as high as older first-time buyers. They have been even harder hit than most.
Elaine, a civil servant, says her bank has given the couple an extra €2,000 on top of the loan amount previously agreed. But she is still angry that she has been forced into additional debt by a surprise decision from the Government.
"Even if they had given people some warning, it wouldn't be too bad," she says.
"And even though the bank has offered us more money, we still have to save hard to make up the rest of it. It's something we really could have done without, particularly with Christmas coming up. But we move into our new place in 10 weeks so we'll just have to save that bit harder."
One would-be buyer from Co Donegal who preferred not to be named believes the abolition of the grant "is not such a bad thing".
"I feel the sum was already built into builders' prices anyway, so it was just making its way into their pockets. A lot of people who have already entered into contracts should try and negotiate with their builder to try and get even €2,000 off the price. A lot of builders won't want the hassle of finding a new buyer and they'll do a deal." However, he believes the abolition of the grant while tax breaks for investors are retained proves policy is tilted towards investors rather than those trying to get started in life.
"And while a lot of Dublin people are complaining, the size of the grant in relation to the price of Dublin houses isn't huge," he adds. "But in places like, say, Leitrim, €3,800 is proportionally a much bigger sum. You'll find buyers in rural areas are suffering the most."