Analysts say Fine Gael and Fianna Fáil election pledges to first-time buyers would push prices up

LAST UPDATE | 14 hrs ago

SOME HOUSING MARKET analysts have warned that prices would be pushed even higher by Fine Gael’s pledges to hike Help to Buy grants by a third to €40,000 and to expand the First Homes shared equity scheme to second-hand property.

Fianna Fáil’s manifesto, launched this morning, also included a pledge to expand shared equity – whereby the state purchases a stake of up to 30% in a new home to help first-time buyers bridge the gap between their mortgage and deposit and the price – to second-hand homes. Fianna Fáil also said it wants to “protect and extend” Help to Buy.

At present, shared equity, launched in 2022, is only for new and self-built homes, meaning people who want to buy a home in areas where new homes are not being built cannot avail of state subsidies. Help to Buy is also only for new builds.

The ESRI has previously warned that Help to Buy is likely to increase prices for new builds, given constrained supply and robust demand for housing.

Taoiseach Simon Harris indicated today that these policies could be a red line issue for Fine Gael in future coalition talks, stating: “We will not go into government in any scenario where the rug is pulled from under first-time buyers.”

‘Classic auction politics’

Lorcan Sirr, a senior lecturer in TU Dublin, said the two proposals amounted to “classic auction politics, using young people as a tool”.

He said both measures would be inflationary, with the boost to the Help to Buy grant likely to have the more immediate impact as developers could price in the increased grant straight away.

The impact of extending shared equity to second-hand homes would also be to increase prices but it would take longer to “seep in”, and was particularly likely to affect prices for the smaller houses that first-time buyers would tend to go for.

“There will be more people with more money bidding against each other,” he said.

He added that the Help to Buy increase was “quite likely…to lead to increased new home prices” with “no guarantee” of any trickle-down boost to supply.

‘Not what we need’

Barra Roantree, assistant professor in economics at Trinity College, said both measures “are likely to put upward pressure on house prices”.

“Both will benefit some potential homeowners, but neither do anything to address the fundamental issue, which is that we aren’t building enough homes,” Roantree said.

“Demand-side subsidies of varying extents just aren’t what we really, really need. What we really, really need is ways of making it easier and cheaper to build. And we’re just so far not seeing that from, to be honest, any party,” Roantree said.

He said Fine Gael’s pledge to hike the Help to Buy grant would be the more inflationary of the two proposed policies because it was a direct transfer of wealth.

Estate agent

However, on the potential for inflation, Kevin Delappe, director of Brocke Delappe estate agents in Dublin, said he believed “we have hit or very close to an affordability ceiling at the moment”.

He said the two initiatives represented welcome support for first-time buyers and would give them more options, but the effectiveness of the proposed extension of shared equity could be limited by “the realities of the second-hand market”.

“Many homes in this category need modernisation as a significant proportion of these are probate [sales] or landlords exiting the market and without added support for refurbishment buyers could face significant out-of-pocket costs that might limit the policy’s benefits,” Delappe said.

Harris defends policy

At Fine Gael’s housing policy launch today, where the party – currently leading in the polls – pledged to spend €10bn of Apple tax money on housing, Minister for Public Expenditure Paschal Donohe was asked about the potential inflationary impact of its election promises to first-time buyers.

Donohoe said the best way to stop homes from becoming more unaffordable was to build more homes.

He said Help-to-Buy would still only be available for new-builds, and the increase in the threshold was smaller than the one made in 2020, when there was a 50% hike from €20,000 to €30,000.

Donohoe, his party’s housing spokesman, said there are price caps in the first home scheme, “thereby minimising the effect that that change could have in the inflation of new or second-home properties”.

These price ceilings range from €350,000 in rural counties to €475,000-500,000 across Dublin and in Cork city.

Opposition parties, including Sinn Féin and Labour, have pledged to phase out Help to Buy.

With reporting by PA.