Stimulating the Secondhand Home Market

Earlier this week, the Irish Times reported on a letter sent from the Institute of Professional Auctioneers & Valuers (IPAV) chief executive, Pat Davitt, to Minister for Finance, Paschal Donohoe. In this letter, the IPAV chief calls for a revision of the current help-to-buy scheme so that first-time buyers of second-hand homes can avail of relief.

The reasoning behind seeking changes to the current regime makes sense; the property market has experienced an unprecedented economic shock on foot of Covid-19 restrictions. Did anyone foresee that we would be using the word “unprecedented” again so soon to describe the decimation of the property market?

According to IPAV members, there is “compelling logic” for the scheme to be widened. Not only is the second-hand marketplace effectively closed, the re-opening is likely to be hampered by continuing Central Bank restrictions on mortgage lending.  Despite robust industry lobbying, the Central Bank chief resisted any calls to ease back those restrictions in early 2020, it will be interesting to see if the sectoral impact of the pandemic prompts a rethink. The help-to-buy scheme provides a tax refund that is designed to help first-time buyers gather up to half of the 10 percent deposit required to purchase a newly-built home, up to a maximum value of €500,000 (5 percent of the value of the property, or €20,000, whichever is lower).

Also, the strict rules around lending up to 3.5 times income is likely to impact upon the record numbers of employees who have been furloughed or who are working reduced hours and/or with reduced pay for the past three months, making securing a mortgage even more challenging for all home buyers. The Irish Times article puts this in perspective by spelling out that “The first-time buyer’s dilemma could be compounded even further [given] the Construction Industry Federation president Tom Parlon’s warning that housebuilding costs could be driven up by the enhanced safety measures surrounding construction during Covid-19”. 

This letter comes days before the property sector is due to re-open for viewings, subject to adherence to an extensive set of new HSE-approved safety protocols. With higher new-build costs and reduced borrowing capacity by home buyers, homeownership will be more unattainable than ever for first-time buyers in Ireland. According to Pat Davitt, “Extending the help-to-buy scheme to second-hand homes would enable many first-time buyers realise their aspiration of owning their own homes. It would also have the effect of freeing up some badly needed rental properties for other would-be tenants”, which, of course, makes sense.

It might now be time for the Government to acknowledge the help-to-buy scheme for the supply-side incentive that it is and to take bold action to openly assist developers and home-builders, while giving much-needed relief to all first-time buyers. The real question is, which Government?