State support for incentives plays key role in new homes supply
Construction sector leaders have been calling for tweaks to some housing schemes to bring their limitations back in line with the reality of current house prices.
The various schemes that provide encouragement for First Time Buyers and others are continuing, with recent Government commitments to extend support out to 2029 — a very welcome attitude for these crucial pillars of support that are too often re-examined every year.
To take such uncertainty out of the picture is to be applauded and welcomed.
“Of the sales of new homes to First Time Buyers last year, about 60% of them involved people using the Help-to-Buy scheme and a further 20% or so of those were using the First Homes Scheme,” says Paul Hannon, director at Sherry Fitzgerald New Homes. “Government incentives form a big part of bridging the gap of affordability for First Time Buyers.”
“Approximately 90% of our First Time Buyers continue to use the Help-to-Buy scheme, making it the most commonly used,” says Elizabeth Hegarty, divisional director, Residential with Savills. “The First Home Scheme has become a bigger player with around 30% of buyers intending to use it where the caps allow.”
Since its introduction, the Government’s shared equity plan (First Home Scheme) has seen a significant take-up after an initially slow start; as more and more people realise its reliability and benefits.
“House prices have increased in a lot of areas and the value of the First Home Scheme is only really coming to seed for a lot of people now,” says Pat Davitt, CEO of IPAV.
“It’s a really good scheme and it’s encouraging a lot of people to go about owning their own home. They’re talking now about continuing it until 2029.”
The fact that Taoiseach Micheál Martin is also talking about extending the incentive to second-hand homes will be a boost for the new homes market as it will help take some of the pressures off the new homes and overall housing market.
“If that is extended, then everybody won’t be chasing the same type of home,” points out Pat Davitt. “It’s not just the advantage of opening up the second-hand home market but it’s also giving the many First Time Buyers the option to buy a second-hand home as well.”
There have been calls from those in the industry to tweak some of the schemes to bring their limitations back in line with the reality of current house prices. With an increasing number of houses tending to go above the price limits, some auctioneers are calling on the Government to raise the value limit.
“When pricing goes above the €500,000 cap, the market is thinner,” says Paul Hannon of Sherry Fitzgerald New Homes. “A lot of houses around the city and the suburbs have broken that €500,000 threshold. They’re still selling but they’re taken that bit longer to sell.
“There should be consideration given to the thresholds for both the First Homes Scheme and the Help-to-Buy Scheme. In the city and suburbs, it’s €475,000. In the county it’s €425,000, so we’re seeing houses qualify in the city but in the county, there are more houses that aren’t qualifying because they’re above that €425,000 limit.”
At Savills Ireland, Divisional Director, Residential, Elizabeth Hegarty finds the same challenge: “The biggest challenge with this is the cap in Cork county is €425,000 which is limiting the options available for purchasers to use the FHS,” says Elizabeth.
“The Affordable Home purchase scheme has proven very popular amongst First Time Buyers and fresh-start applicants. Savills was delighted to agree nearly 140 units under this model last year with a new scheme of 85 units under the Affordable Home purchase scheme due to launch to market in Spring.
“These schemes play a crucial role. The new homes market is heavily subsidised and dependant on these schemes. We have seen the sales velocities slow on units above the €500,000 threshold for the Help-to-Buy. Likewise, the challenges with the caps on the First Home Scheme are also evident. I believe that there was more of a hesitancy around the shared equity schemes initially, but this hesitancy has tended to shift to necessity now in order to buy their home.”
After the increases in interest rates three years ago, rates have now stabilized and this is reflected in the attractive fixed rates being offered by a number of lending institutions at the moment.
“Interest rates are looking good and they look like they might come down even further, I think,” says Pat Davitt, CEO of IPAV.
“This is obviously a big help to people as well — for those who already have mortgages, as well as for First Time Buyers, especially if they can fix them now for five or ten years. Now, people have another opportunity to fix their mortgage rates for a longer term and they’ve seen what can happen if a bit of volatility hits the market. So it’s definitely a good time for people to look at fixing for a longer term.”
“We’re obviously on a downward cycle in terms of interest rates, based on the way the world is at the moment,” says Paul Hannon, Director at Sherry Fitzgerald New Homes. “We had that spike in rates over two years – which should have affected the market massively and which should have resulted in a fall-off in demand, but which didn’t.”
“Interest rates do remain steady,” says Elizabeth Hegarty, Associate Director of Savills Ireland. “There is a huge focus from buyers to secure a green mortgage. Regarding fixing, this would be a decision made with the purchasers and their financial advisor.”
