With Budget 2017 announced just over a month ago, there is some hope to be had in the proposed improvements to the first time buyers market. So what does that mean for you as a first time buyer? We know that lots of our customers use our facilities when moving home, downsizing, as a sort of layover for their stuff! So we know that you guys will be interested in what this Budget signifies for you. We have done the research and will present you with all that you need to know – so if you are aiming to get a foothold on the housing ladder this year you have come to the right place!
The housing situation as it stands in Ireland is entirely out of hand, with reports of a further 25% increase in rental prices across the country in the next two years. There is an extremely low rate of first time buyers purchasing new homes – for every 12 homes bought by first time buyers, only one of these is a new home, the rest are all pre-existing homes. This has created a freeze in the housing industry, with no incentive to buy new homes, and with that being virtually impossible when a 20% deposit is required up front to secure a mortgage.
The ghost estates of the Celtic Tiger remain, rental prices are soaring as prospective buyer’s cannot secure mortgages, and homelessness is at the highest level on record. This lockdown must end and it begins with freeing up the mortgage situation.
So has Budget 2017 done anything to alleviate the situation?
The First Time Buyer Scheme is what has been proposed by the government, and it looks promising. What’s on offer is a one time rebate of 5% of the value of the home (provided it is a new home) up to a maximum purchase price of €400,000.
The help to buy scheme aims to assist first time buyers to come up with the deposit required to buy their home.
The scheme is also called the Help To Buy Scheme – in case you become confused when researching!
Some of the finer details:
Definition of a First Time Buyer: Revenue say that “The first-time buyer must not have either individually or jointly with any other person (directly or indirectly), previously purchased, orbuilt a property.” So – owning an inherited property will not exclude people from this scheme.
The 5% will only apply to houses priced up to €400,000. Initial plans were that buyers will still be eligible for a tax rebate on property purchases up to €600,000 – but the rebate will be limited to €20,000. This upper limit may not be agreed by the Dail.
No rebate will be available on houses priced over €600,000.
The rebate applies to NEW homes only – this includes self builds.
The total tax rebate will be limited to the total income tax and DIRT paid over the previous four tax years and will be capped at €20k. If you have paid less than €20k income tax/DIRT in the past 4 years – the maximum rebate possible will be the amount of tax you paid.
The rebate is backdated to 19th July 2016, so anyone who purchased a new home from this date on also qualifies for a rebate if they are eligible.
Examples of Rebate Amounts:
Purchase Price Max Tax Rebate
What is Clawback? The property must be occupied by the first-time buyer, or at least one of the first-time buyers in the case of multiple first-time buyers , for a period of five years from the date the property is habitable — otherwise some or all of the rebate will have to be repaid. See Below …
Leave or sell within 1 year – 100% of rebate to be repaid.
Leave or sell within 2 years – 80% of rebate to be repaid.
Leave or sell within 3 years – 60% of rebate to be repaid.
Leave or sell within 4 years – 40% of rebate to be repaid.
Leave or sell within 5 years – 20% of rebate to be repaid.
Applications for the Help to Buy scheme are not going to be accepted by Revenue until January 2017. The Help to Buy scheme is due to run until the end of 2019.
The final legislation is not yet passed – but the proposed minimum mortgage is 70%. So anyone with a deposit of 30% or less will meet that requirement.
Will this Help to Buy Scheme change the current housing situation? This is difficult to predict, but looking at similar schemes in other countries might suggest that it should help the situation. It may take some years for the housing market itself to change, with a 300% increase in vacant rental units predicted to be required to even stabilise rental prices, but it is a step in the right direction. But much more is needed to be done in the short term to stabilise rent and urgently tackle homelessness.
What ever came of previous first time buyers grants? There was a First Time Buyers Grant in operation from 1977 to 2002. When it was abolished it was worth all of €3,610. The Housing Minister at the time said the grant “returned little benefit to consumers” and had “simply been absorbed in the increased profits of builders”. We wonder if the same thing will happen this time around?…..