Dáil Éireann Debate, Thursday - 18 May 2017
25. Deputy Barry Cowen asked the Minister for Finance his views on whether the first time buyers grant is having a destructive impact on the private housing market and leading to massive inflationary pressures in the price of homes. [17418/17]
Amharc ar fhreagraAs the Deputy will be aware, the Help to Buy incentive was initially announced on 19 July 2016 as part of 'Rebuilding Ireland: Action Plan for Housing and Homelessness'. This plan contains a significant volume of responses to the current housing crisis, of which the HTB incentive is just one. The comprehensive Action Plan takes a holistic approach in addressing the many interacting structural constraints affecting the housing market in areas such as planning and land use, as well as regulation and skills deficits in the construction sector. While the primary focus of the Action Plan is to tackle structural constraints, fiscal supports can play a supporting and time-bound role in addressing the current problems in the housing sector.
It is in this context that the Help to Buy scheme should be considered. Its role is to complement the other measures in the Action Plan. The extent to which the scheme could lead to an increase in residential property prices will very much depend on the speed and efficiency with which structural supply constraints are eliminated and residential building activity increases. Therefore, the impact of the HTB incentive on property prices should not be considered in isolation from the impact of other measures contained in the Action Plan, which are primarily designed to increase supply. In this regard I note that a number of indicators point to a strengthening recovery in the housing market. The latest Ulster Bank construction PMI indicates a pickup in the rate of construction activity growth of approximately 1 per cent between March and April. The index suggests that housing activity has continued to expand each month since July 2013.
From a supply perspective, commencement notices in the 12 months to February 2017 (13,169), increased by approximately 27.4 per cent compared to the same period in 2016 while new house guarantee registrations (6,537) increased by approximately 53 per cent. ESB connections, a proxy for house completions rather than the level of construction activity (15,327), increased by 15.7 per cent in the 12 months to February 2017 compared to the same period in 2016. However, the growth in both starts and completions continues to emanate from a very low base and it will take some time for the level of new construction to meet the current demographic demand for housing.
In my view, it is the lack of supply that is primarily responsible for driving house prices higher and I would point out that increases in house prices prevailed long before the introduction of the Help to Buy incentive. I would also point out that the incentive is targeted towards new build homes only, and to first-time buyers only, and it would be simplistic to designate this incentive as being the sole or the major contributor to house price increases.
Furthermore, the incentive is designed to help first-time buyers 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 those rules must also be satisfied and the incentive plays no role in relation to that aspect.
I wish to assure the Deputy that my Department continues to monitor developments in the property market including movements in property prices. In this regard, the Deputy may be aware that following a competitive tender process I have commissioned Indecon Economic Consultants to undertake an independent impact assessment of the incentive. This will look at, among other issues, its potential impact on property prices, and the final report is due to be presented to me by 31 August 2017.
