A number of initiatives to help the housing market were announced in today’s Budget.
One of the headlines from Minister for Finance Michael Noonan’s speech was a help to buy scheme to address the shortage of housing in the country.
The scheme will provide a rebate of income tax paid over the previous four tax years up to a maximum of 5% the purchase price of a new home up to a value of €400,000, to first-time buyers of new houses.
Pro rata rates will apply to lower priced houses and a full rebate calculated on €400,000 will also apply to houses in excess of €400,000 and up to €600,000. No rebate will be paid on house purchases in excess of €600,000.
That is worth €20,000 for a household which buys a house at the maximum value.
Second hand properties are not included in the help to buy scheme. Minister Noonan said this was because second hand homes did not help to address the low number of new builds available.
He did announce the extension of the Home Renovation Incentive Scheme by two years though to the end of 2018.
Mortgage Interest Relief will also be extended beyond December 2017 to 2020.
The Finance Minister also announced measures to address problems in the rental sector. Landlords got the expected 5% increase in the amount of mortgage interest they can deduct, which will rise from 75% to 80% in 2017.
the ceiling for the rent-a-room scheme is to be raised to €14,000, allowing homeowners to rent out rooms in their house at current average prices. Minister Noonan said this should be particularly helpful to third-level students.
The thresholds for inheritance tax was also raised. The Category A threshold that applies to inheritances/gifts from parents to their children is being increased by €30,000 to €310,000. There will also be increases in the Category B (brothers, sisters, grandparents etc) and C (unrelated) thresholds by 8% to €32,500 and €16,250 respectively, with the Minister giving a commitment that this would rise more in future Budgets.
Meanwhile, Minister for Public Expenditure Paschal Donohoe said he was allocating €1.2 billion in funding for housing to the Department of Housing, Planning, Community and Local Government for 2017.
With ths he said the Government would deliver 47,000 new social homes by 2021.
He also announced a further €105m for the Housing Assistance Payment Scheme, bringing its total budget to nearly €153m. Minister Donohoe said this will enable an additional 15,000 households to avail of HAP.
Not everyone was happy with the changes though. Estate agents Savills accused the Government of bottling out of cutting VAT on new homes because “it would simply have looked too much like a handout for developers.”
They said: “The centrepiece of this year’s Budget is a Help-to-Buy scheme which will give first time buyers an upfront tax rebate equal to five percent of the value of the property when they purchase a new home… Unfortunately this also makes housing less affordable. Alternative approaches, such as cutting VAT on new homes, would equally have encouraged development – but at a lower price point.”