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Help-To-Buy Scheme

Dáil Éireann Debate, Thursday - 18 May 2017

Thursday, 18 May 2017

Questions (9)

Pearse Doherty


9. Deputy Pearse Doherty asked the Minister for Finance if he will suspend the help-to-buy scheme in view of the large increases in house prices; and if he will make a statement on the matter. [23357/17]

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Oral answers (7 contributions) (Question to Finance)

Following the last discussion, it would be helpful if the Minister indicated whether the Government intends to respect the outcome of the vote on the resolution passed in the Dáil not to sell AIB shares. He should do that during Question Time.

My question relates to the help-to-buy scheme, a matter Deputy Michael McGrath has already teased out with the Minister. Our position on it is very clear. It is a bad scheme. The Minister talked about learning lessons from what happened in the past, yet he brought forward an incentive that would only result in an increase in house prices. Everybody and his or her dog warned the Government about this before the incentive was introduced. Many pointed to the fact that we had escalating house prices as a result of the Minister's failed help-to-buy scheme. Will he agree, at a minimum, to suspend the scheme? It made no sense to introduce it in the first place. It is a contributory factor in putting houses beyond people's reach and it could potentially lead to another boom-bust scenario.

I answered a similar question put by Deputy Michael McGrath, but I will read the reply to this one also. As the Deputy will be aware, the help-to-buy incentive was announced as part of Rebuilding Ireland: Action Plan for Housing and Homelessness. The plan contains a significant volume of responses to the current housing crisis, of which the help-to-buy incentive is just one. Therefore, the impact of the incentive on property prices should not be considered in isolation from the impact of other measures contained in the action plan which have been primarily designed to increase supply. My Department continues to monitor developments in the property market, including movements in property prices. In that regard and as I outlined, the Deputy may be aware that I have recently commissioned an independent economic impact assessment of the help-to-buy incentive which will be completed by Indecon Economic Consultants. The report will examine its potential impact on property prices, among other issues, and is due to be presented to me by 31 August.

In my view, it is the lack of supply that is primarily responsible for driving house prices higher. I point out that increases in house prices prevailed long before the introduction of the help-to-buy incentive. I also point out that the scheme is targeted at new build homes only and first-time buyers only and that it would be simplistic to designate the incentive as being the sole or major contributor to house price increases. Furthermore, the incentive has been designed to help first-time buyers to obtain the deposit required to facilitate the purchase of a home. Therefore, it helps first-time buyers to meet the loan-to-value requirements of the Central Bank's macro-prudential rules. However, the loan-to-income requirements of these rules must also be satisfied and the incentive plays no role in relation to that aspect.

Additional information not given on the floor of the House

The help-to-buy legislation, as passed by the Oireachtas in the Finance Act 2016, contains a sunset clause of 31 December 2019. I believe suspending the help-to-buy incentive at this point, as suggested by the Deputy, would be detrimental to those first-time buyers who are availing of or planning to avail of the incentive in order to facilitate the purchase of their first home. Furthermore, I do not believe such a suspension would have any impact in reducing the price increases being experienced in the market. However, I will review the position as part of my deliberations for budget 2018 when the results of the impact assessment are available.

Watching the Government on this issue is like watching a drowning man telling everybody that he is fine as the water comes up around his face. This week we had the International Monetary Fund telling us that, in the light of increasing houses prices, the planned review of the recently introduced help-to-buy scheme which might add to demand pressures was welcome. We have seen other reports which state it is a contributory factor, but we need to look at what is happening. The problem is that all of the arguments put forward by the Government have fallen flat on their face and it has been done again today. The primary reason articulated during the introduction of this measure was it would help people to raise a deposit in the light of Central Bank rules. First-time buyers must have a deposit of 10%, which means a loan-to-value ratio of 90%. Anybody with a loan-to-value ratio less than this had more to put towards a deposit. The released figures indicate that 72% of claims - not applications - were from individuals who had no problem whatsoever in reaching the deposit level. Let us put a figure on it, if it relates to motivation. A sum of €17 million has been paid out, meaning that approximately €13 million has been paid to people who did not have a problem because of Central Bank rules in the first place. Some of the claims came from people who could put 30% upfront in cash. The Minister is putting the country's money into their pockets when they do not need it.

As I stated, I never thought I would see Sinn Féin advocating policies to prevent young people from acquiring their first home. I gave the figure of €22 million to Deputy Michael McGrath today. It defies belief to argue that an injection of €22 million into house purchasing is the factor that is driving up prices when house purchasing is now back as a multi-million euro industry again and there is a very strong flow of mortgages facilitated by the prudential rule changes made by the Central Bank. It is very difficult to accept the argument that this has led to a general rise in house prices when it does not apply to second-hand homes. It is very difficult to believe it gives an injection to house prices when it only applies to first-time buyers. It certainly put a bit of jizz into the market for starter homes, but before it was introduced, there were no starter homes being built and if they were, they were not being purchased. It has been effective, but we will see what Indecon states. Whoever is here at the end of August or early September will make the report available and the Deputy should suspend the propaganda until he sees the evidence. What he is saying does not stand up to economic scrutiny.

The Minister is the master of the propaganda as I put hard facts to him. He has put money into the pockets of the 72% who have made claims under the help-to-buy scheme and they did not have a problem with the Central Bank rules. He states this is one of the primary reasons he introduced the scheme, but he does not want to deal with it - he wants to dismiss it - because he is wrong. He knows that it is flawed as the figures have come from the Revenue Commissioners. He makes the accusation that we are against young couples getting onto the property ladder. Is he off his rocker on this one? House prices are increasing by 10% per year. A house worth €400,000 will increase by €40,000 in the next year unless we do something about it. It is not just about the help-to-buy scheme; there is also the matter of supply and demand. Where there is constrained supply, the last thing one does is throw money at individuals in order that those who are selling houses put up the prices. It is having a knock-on effect within the market. Will the Minister ensure young couples will be able to get back onto the property ladder by stopping this scheme, as it is a contributory factor in the escalating house prices across the State? He has called my comments propaganda, but it is not just Sinn Féin who state this. We have heard similar statements from consultants, economists and even the IMF which is no friend of Sinn Féin. They tell us to be cautious and step carefully on this issue.

Will the Minister confirm that he will respect the vote result on the motion passed earlier today on the sale of shares in AIB?

I have answered that question. There was a misunderstanding in the votes today and the matter is now in dispute. There are discussions taking place with the Ceann Comhairle's office and we will await the outcome. I remind the House that it already committed to and voted on the programme for Government which includes a commitment to sell up to 25% of the shares in AIB. That is the position. Deputy Pearse Doherty will not agree with me and I will not agree with him. Indecon will bring forward a report by the end of August and we will then see what is the position.