Media: Scrapping Help-to-buy Scheme would be disruptive and a mistake

Askthe EA

REFLINE1 wrote: »

yes ,and all the previous phase launches of those estates had jumped a similar amount,phase to phase, well prior to the FTB grant.

This is standard practice. Start low to generate cash flow and increase prices as the phases sell and supply decreases. Has always been thus, a point the TV show didnt allude to.

Im working on 2 developments and the price rises were all long decided before the HTB was announced.

awec

The_Conductor wrote: »

We do know though- RTE Primetime Investigates- 10 days after the scheme was announced- showed the maximum allowed under the scheme, neatly incremented onto the asking prices for all new developments they examined. I know there are coincidences- however...............

Yes, but we have no idea if house prices would have hit today's prices regardless.

The HTB undoubtedly resulted in an immediate increase, but there is more than a decent chance that increase would have happened anyway. The lack of supply is the ultimate driver of prices.

REFLINE1

Askthe EA wrote: »

This is standard practice. Start low to generate cash flow and increase prices as the phases sell and supply decreases. Has always been thus, a point the TV show didnt allude to.

Im working on 2 developments and the price rises were all long decided before the HTB was announced.

Correlation does not mean causation!

Colonel Claptrap

Graham wrote: »

I'd argue that the developments would have gone ahead without the 'indirect grant', there's nothing to suggest building activity has increased as a result of the HTB scheme.

There's nothing to suggest the opposite either.

The Construction Industry Federation have been very vocal about keeping the scheme. And who can blame them?

Graham wrote: »

I would prefer to see developers offered tax breaks for delivering specific quantities of units, at specific densities, to a specified (and inspected) standard at or below a specific target price.

More restrictive regulations and red tape. This is the very thing developers are blaming for the low trickle of supply.

Everybody has been screaming for more supply. I'm yet to be convinced that dropping the scheme achieves this.

Graham

Colonel Claptrap wrote: »

There's nothing to suggest the opposite either.

That's hardly the most compelling reason I've ever heard to justify throwing millions of euro at something.

Colonel Claptrap wrote: »

The Construction Industry Federation have been very vocal about keeping the scheme.

Neither is that.

The_Conductor

Lol- one way or another- the most obvious thing is- the Central Bank have stated they are taking the effect of the HTB scheme into account in its assessment of how the favourable treatment of deposit requirements for First Time Buyers has progressed. They have previously advised that they were not consulted about the scheme before it was launched- and would not have reduced deposit requirements for FTBs had they been aware of the scheme.

Aka- there is blood in the water between the CB and the government over the scheme. Its foreseeable that either the scheme goes- or deposit requirements for FTBs drops to the same level as for everyone else- neither of which will appeal to prospective first time buyers imminently........

Askthe EA

REFLINE1 wrote: »

Askthe EA wrote: »

This is standard practice. Start low to generate cash flow and increase prices as the phases sell and supply decreases. Has always been thus, a point the TV show didnt allude to.

Im working on 2 developments and the price rises were all long decided before the HTB was announced.

Correlation does not mean causation!

Exactly

Fabregas86

The scheme has not sent prices spiraling, a small increase i would say but overall it has got builders building again as people can afford to gather a deposit with the help of the HTB scheme.it is a simple case of prices going higher and higher because of the demand for homes against the lack of supply.like any product if there is a shortage the prices spirral and without the scheme new homes simply would not have been built because of the Central bank rules around deposit amounts. The 600k Cap is ridicoulous if buying a home at these prices you simply do not need the tax break.it should be lower acale and available on both new and 2nd hand homes for first time buyers.

Colonel Claptrap

Fabregas86 wrote: »

The scheme has not sent prices spiraling, a small increase i would say but overall it has got builders building again as people can afford to gather a deposit with the help of the HTB scheme.it is a simple case of prices going higher and higher because of the demand for homes against the lack of supply.like any product if there is a shortage the prices spirral and without the scheme new homes simply would not have been built because of the Central bank rules around deposit amounts. The 600k Cap is ridicoulous if buying a home at these prices you simply do not need the tax break.it should be lower acale and available on both new and 2nd hand homes for first time buyers.

They reduced it to 500k. It was argued that if it was reduced further it would disadvantage some Dublin buyers where a modest 3bed semi often fetches ~400k.

If the aim is to increase supply, then extending it to 2nd hand homes would be counterintuitive.

Sarn

I'd prefer if they got rid of the HTB incentive and brought back mortgage interest relief. That would probably increase prices in some areas, however, with the 3.5x salary cap and a tightening of the exemptions to reflect such a change it shouldn't increase them significantly.

It should definitely not be extended to second hand homes.

Fabregas86

in my opinion anyone spending 500k or even 400k does not need this tax break and if they really need to avail of it to help them finacially then they surely are not in a position to be purchasing a home for that sort of money
it would still increase the supply of new homes weather it be for new or 2nd hand homes
buying a new home is not always the best option for everyone in this case the scheme only being available to new home buyers only benefits those who can afford a new home and in many cases the 2nd hand 3 bed around the corner from the new 3 bed developments are an awful lot cheaper surely it should cater for those not in the position to buy a new home, you would find it very difficult to get your hands on a new home for less than 200k in many parts of the country unfortunatly in those in the less fortunate position are getting no help at all on there 1st purchased 2nd hand home.

Fabregas86

Sarn wrote: »

I'd prefer if they got rid of the HTB incentive and brought back mortgage interest relief. That would probably increase prices in some areas, however, with the 3.5x salary cap and a tightening of the exemptions to reflect such a change it shouldn't increase them significantly.

It should definitely not be extended to second hand homes.

if it was extended to 2nd hand homes it is still only available for the 1st time buyer this would not stop builders building new homes as the demands are massive
The days of Developers building New Homes and selling them 150k , 200k are long gone it is more or less saying if you havent 250k for a newly built home them you are not getting it at all 2nd hand homes are alot cheaper than the new build some parts of society have been left behind with the scheme

Colonel Claptrap

Fabregas86 wrote: »

in my opinion anyone spending 500k or even 400k does not need this tax break and if they really need to avail of it to help them finacially then they surely are not in a position to be purchasing a home for that sort of money
it would still increase the supply of new homes weather it be for new or 2nd hand homes
buying a new home is not always the best option for everyone in this case the scheme only being available to new home buyers only benefits those who can afford a new home and in many cases the 2nd hand 3 bed around the corner from the new 3 bed developments are an awful lot cheaper surely it should cater for those not in the position to buy a new home, you would find it very difficult to get your hands on a new home for less than 200k in many parts of the country unfortunatly in those in the less fortunate position are getting no help at all on there 1st purchased 2nd hand home.

Keep in mind that the scheme is not designed to help people buy a home (despite the name). It's primary goal is to encourage developers to build more homes.

Helping people buy a second hand home does not increase the supply of housing stock. It just enables existing houses to pass from one owner to another.

As for 500k limit. The scheme should not encourage people to buy 'starter homes' in my opinion. The idea of getting your foot on the property ladder is what got us into this mess in the first place.
The reality is a 3bed semi costs at least 400k in large parts of Dublin. Enticing these buyers to buy shoeboxes first, and upsizing later would be dangerous.

Also, the additional cost to the exchequer of a 300k home compared to a 500k home is only €5,000. There are so few new builds at the moment that this is neglible when you consider the larger social benefit of housing people.

Fabregas86

Colonel Claptrap wrote: »

Keep in mind that the scheme is not designed to help people buy a home (despite the name). It's primary goal is to encourage developers to build more homes.

Helping people buy a second hand home does not increase the supply of housing stock. It just enables existing houses to pass from one owner to another.

As for 500k limit. The scheme should not encourage people to buy 'starter homes' in my opinion. The idea of getting your foot on the property ladder is what got us into this mess in the first place.
The reality is a 3bed semi costs at least 400k in large parts of Dublin. Enticing these buyers to buy shoeboxes first, and upsizing later would be dangerous.

Also, the additional cost to the exchequer of a 300k home compared to a 500k home is only €5,000. There are so few new builds at the moment that this is neglible when you consider the larger social benefit of housing people.

i agree with alot of what you have said but saying its primary goal is to get builders building again is very far from the truth

it works 50/50 for the builder and the purchaser without the htb scheme the builder will not have customers and the family looking for there first home have all of a sudden got a massive break they are flocking to buy and the builder is flocking to build. they both need each other for the scheme to be seen at its best effective

awec

Fabregas86 wrote: »

in my opinion anyone spending 500k or even 400k does not need this tax break and if they really need to avail of it to help them finacially then they surely are not in a position to be purchasing a home for that sort of money
it would still increase the supply of new homes weather it be for new or 2nd hand homes
buying a new home is not always the best option for everyone in this case the scheme only being available to new home buyers only benefits those who can afford a new home and in many cases the 2nd hand 3 bed around the corner from the new 3 bed developments are an awful lot cheaper surely it should cater for those not in the position to buy a new home, you would find it very difficult to get your hands on a new home for less than 200k in many parts of the country unfortunatly in those in the less fortunate position are getting no help at all on there 1st purchased 2nd hand home.

You should try saving for a property in Dublin and surrounding counties while paying Dublin rents. Modest 3 bed semi-ds or terraces are very often in the 400-500 bracket. There are even 3 bed terrace houses releasing this weekend that are so expensive they fall outside the scope of HTB entirely. The idea the people buying these 400/500 properties are all rich is a fallacy, they are your standard double income middle class working families/couples.

At the end of the day though what you get back is tied to the value of the house but also to what you have contributed to Revenue, the people buying the 500k house will have paid the taxes required to get their tax refund. The rebate isn't stretching anyone financially, the exact same mortgage rules still apply, it just makes it easier for people renting given the current crazy rent rates.

Fabregas86

awec wrote: »

You should try saving for a property in Dublin and surrounding counties while paying Dublin rents. Modest 3 bed semi-ds or terraces are very often in the 400-500 bracket.

At the end of the day though what you get back is tied to the value of the house but also to what you have contributed to Revenue, the people buying the 500k house will have paid the taxes required to get their tax refund. The rebate isn't stretching anyone financially, the exact same mortgage rules still apply, it just makes it easier for people renting given the current crazy rent rates.

good point,
At the end of the day though what you get back is tied to the value of the house but also to what you have contributed to Revenue, the people buying the 500k house will have paid the taxes required to get their tax refund.

i have done both rent/save and buy in dublin and just completed the process by the skin of my teeth rough is not the word
without the scheme i would not have got where i am for quite a long time after a long period saving & renting with the way the central bank rules were

morrga

Fabregas86 wrote: »

in my opinion anyone spending 500k or even 400k does not need this tax break and if they really need to avail of it to help them finacially then they surely are not in a position to be purchasing a home for that sort of money
it would still increase the supply of new homes weather it be for new or 2nd hand homes
buying a new home is not always the best option for everyone in this case the scheme only being available to new home buyers only benefits those who can afford a new home and in many cases the 2nd hand 3 bed around the corner from the new 3 bed developments are an awful lot cheaper surely it should cater for those not in the position to buy a new home, you would find it very difficult to get your hands on a new home for less than 200k in many parts of the country unfortunatly in those in the less fortunate position are getting no help at all on there 1st purchased 2nd hand home.

The people buying a house in that bracket are buying in areas where they grew up in or are now settled so you cant exclude someone's want to settle in their area based on where they are from as that equates to Geographical discrimination.

LirW

Depending on the definition of area, 400k doesn't buy you a mansion really. If you're in Dublin that price buys you a modest house in a nice area. I have friends where she grew up in Sutton, he grew up in Drumcondra, of course they couldn't afford either so they settled on buying an Ex corpo house in Marino two years ago for around 360k. My OH grew up in Glasnevin, we couldn't even afford buying in Dublin and I honestly don't see how this is geographical discrimination. There is no entitlement on buying where you grew up. Especially in Dublin that's not a particularly large city.
How do people that grew up in Blackrock or Dun Laoghaire deal with it? Loads of them can't afford buying even close to their parent's home.

morrga

LirW wrote: »

Depending on the definition of area, 400k doesn't buy you a mansion really. If you're in Dublin that price buys you a modest house in a nice area. I have friends where she grew up in Sutton, he grew up in Drumcondra, of course they couldn't afford either so they settled on buying an Ex corpo house in Marino two years ago for around 360k. My OH grew up in Glasnevin, we couldn't even afford buying in Dublin and I honestly don't see how this is geographical discrimination. There is no entitlement on buying where you grew up. Especially in Dublin that's not a particularly large city.
How do people that grew up in Blackrock or Dun Laoghaire deal with it? Loads of them can't afford buying even close to their parent's home.

If you grew up in an area of Dublin where a starter home is 525k and another person grew up in an area where a starter home is 450k. Both work for the same company and earn the same salary. Both want to settle in the area they know well. One is entitled to the HTB scheme the other isn't. Sounds a bit like geographical discrimination to me.

LirW

You wouldn't get HTB though for anything above 400k?
Nobody is forcing these people to buy around the corner of their parents. I would have loved to buy in Howth for example but I can't and I don't see any discrimination.
When people in the average age of FTB buy with a Dublin- and age adequate salary there is only a certain amount they can borrow, unless they managed to have a huge deposit. With the 10% you have to bring up the capacity very rarely exceeds 400k. For a house with a 10% deposit that's selling for 525k you need to have a combined salary of 135k annually if you're a childless couple. That's not the average first-time buyers salary range.

Mickiemcfist

LirW wrote: »

You wouldn't get HTB though for anything above 400k?
Nobody is forcing these people to buy around the corner of their parents. I would have loved to buy in Howth for example but I can't and I don't see any discrimination.
When people in the average age of FTB buy with a Dublin- and age adequate salary there is only a certain amount they can borrow, unless they managed to have a huge deposit. With the 10% you have to bring up the capacity very rarely exceeds 400k. For a house with a 10% deposit that's selling for 525k you need to have a combined salary of 135k annually if you're a childless couple. That's not the average first-time buyers salary range.

A couple with individual earnings of 67.5k each aren't exceptionally wealthy either. National average salary is a bit over 50k

morrga

LirW wrote: »

You wouldn't get HTB though for anything above 400k?

HTB goes up to 500k purchases with the rebate capped at 400k.

morrga

Mickiemcfist wrote: »

A couple with individual earnings of 67.5k each aren't exceptionally wealthy either. National average salary is a bit over 50k

The basis of the argument is not based on average national salaries. Its based on two people earning the same salary from the same company living in two different locations with the same want.

Mickiemcfist

morrga wrote: »

The basis of the argument is not based on average national salaries. Its based on two people earning the same salary from the same company living in two different locations with the same want.

I'm on your side of the argument, just trying to state that a 135k combined earnings shouldn't preclude people from having tax rebates to assist with the purchase of a house in their locality.

Colonel Claptrap

Mickiemcfist wrote: »

I'm on your side of the argument, just trying to state that a 135k combined earnings shouldn't preclude people from having tax rebates to assist with the purchase of a house in their locality.

Precisely. Also, why consider average salaries, when we're discussing the upper limit of the scheme.

Mickiemcfist

Colonel Claptrap wrote: »

Precisely. Also, why consider average salaries, when we're discussing the upper limit of the scheme.

Because the upper limit of the scheme is limited to pretty much average professional salaries in Dublin, just highlighting that it's not there to help exceptionally wealthy people.

morrga

Mickiemcfist wrote: »

I'm on your side of the argument, just trying to state that a 135k combined earnings shouldn't preclude people from having tax rebates to assist with the purchase of a house in their locality.

Sorry yes I noticed that after I replied. Meant to reply to LIRW.

zl1whqvjs75cdy

Mickiemcfist wrote: »

A couple with individual earnings of 67.5k each aren't exceptionally wealthy either. National average salary is a bit over 50k

Think the national average salary is a bit lower than that. 43 k or so maybe? Open to correction there.

morrga

donkeyoaty0099 wrote: »

Think the national average salary is a bit lower than that. 43 k or so maybe? Open to correction there.

There are two economies in this country though so the national wage average is a flawed tool.

Basically the scheme was not designed to be means tested which it has now become with the shift from 600k to 500k.

The_Conductor

I know I'm probably going to be slated for even suggesting this- but how about the scheme was reformed in this sort of manner:

1. The actual HTB limit is divorced from your income tax paid- as this was just a convenient linkage that the Minister came up with at the outset.
2. The scheme continues to apply only to new builds
3. Geograghical restrictions introduced- scheme does not apply to large areas of the country that are not under the same pressure as the main urban areas.
4. Related to (3)- the scheme only to apply to areas included in the RPZ rent contolled areas- and can be removed or added to, as the RPZ zones are redefined
5. New limits introduced- e.g. property being bought must be of a minimum size (definitely bigger than the reduced sizes the Minister introduced)
6. A higher rate applies for higher density dwellings in RPZs (and let the LAs fight this amongst themselves)
7. In an effort to divorce the payment from simply being incremented onto the market value of units- split it in 2- relating to ownership- 50% payable on occupation of the unit- 50% payable after 5 years, if you're still living in the unit
8. No HTB other than for new properties- however, it can apply to non FTBs providing they intend to live in their new property
9. It can be seen to be both a carrot and a stick for developers- make the payment contingent on higher spec properties- than are currently the case- particularly in Dublin (keep in mind there was HTB paid for new apartments that look nice- but have serious pyrite issues in Marino)- i.e. it has to be a sword of Demacles that has a future effect.

10. For the last and final time- design it in such a way that its a 'Help To Buy' scheme specifically only targetting newly constructed units. It is not supposed to be a sop to developers- and by rights- it shouldn't be solely for First Time Buyers (there are plenty of subsequent buyers out there- who don't owe any property and have significant debt- thanks to negative equity deals- I'd argue this cohort are at very least as deserving as FTBs)

There is at least as much wrong with the current scheme, as there is right- but there is a foundation in place- that could usefully be worked with- providing someone was willing to grab the bull by the horns on it.