Six months on - what we’ve learned about Help to Buy

Launched to great anticipation in January of this year, Help to Buy has seen activity ramp up in the first-time buyer new build market.

The scheme, which allows first-time buyers to apply for a rebate on taxes paid of as much as 5 per cent of the purchase price, up to a limit of €20,000, has been praised in some quarters for helping home buyers get on the housing ladder, and bemoaned in others for exacerbating the housing crisis.

Latest figures from the Revenue Commissioners show that there have been almost 7,000 applications to the scheme thus far, and also give a detailed insight into just who is buying what. So almost six months on, how is the scheme actually working?

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There is a myriad of reasons as to why house prices are rising; but Help to Buy must be one factor.

In the first quarter of 2016 for example, the average first-time buyer loan was

€ 177,722 - but figures from the Revenue show that just 15 per cent of claims so far for Help to Buy were for properties valued at between €151k - €225k. The most numerous buyers (35%) in fact - and it probably has something to do with the prevalence of Dublin buyers - were those buying a property valued at between €226k-€300k, while a further 28 per cent were in the €301k-€375k range.

Buyers are buying up to the limit

It was controversial at first, and the Government eventually backed down on its decision to impose a qualifying cap on a purchase price of €600,000 on the value of a property, but the figures show that there is demand from first-time buyers for pricier abodes.

With an eligibility cap of €500,000, the figures show that some 12 per cent of those who have successfully claimed for the scheme bought in the €376-€450k price range, with a further 6 per cent, or 121 purchases, buying houses worth over €450k.

Self-builders are successfully applying for the scheme

One of the key concerns for some when the scheme was first launched, was whether or not it would apply to first-time buyers who built their own houses. Well the figures show that self-builders are very much successful in their applications for the scheme, with 273 claims paid out to self-builders, representing about 13 per cent of total successful claims.

There was a significant backlog of applicants

Although applicants could only apply for Help to Buy in January of this year, first-time buyers who purchased since July 19th last year were actually eligible to apply. And many of them did; figures show that about a quarter of applicants to the scheme actually purchased in the second half of 2016, and of these, 88 per cent have successfully claimed their tax rebates.

It can take some time to get your rebate

More than 1,100 first-time buyers bought last year and successfully applied for the scheme retrospectively; however of these claims, about 241, or 13 per cent, are still “pending”. Given that one could expect most of these purchasers would have applied for their money back soon after the scheme launched, it shows that there can be a significant lag between the time you apply, and the time you get the money into your account. Moreover, of the near 7,000 or so applications which have been approved since the scheme launched in January, only about 16 per cent have received their rebates.

It’s an urban phenomenon

With new development largely restricted to larger urban areas, the figures also show that Help to Buy applicants are predominately applying for new builds in these areas also.

The figures show that 40 per cent of applicants to date have been looking to buy in the Dublin area, followed by Meath (11%); Kildare (10.4%); Cork (9.4%) and Wicklow (5.8%).

Looked at this way, the figures offer a useful insight into where construction is taking place - and where it isn’t. Limerick, for example, Ireland’s third largest city has had only 65 applicants for the scheme since January, while Galway has had a little more at 71. Unsurprisingly, rural counties like Leitrim, Longford and Sligo have had few applicants, with less than 10 per county.

Relaxation in the Central Bank’s rules is having an impact

From January, first-time buyers have been benefiting from a relaxation in the Central Bank rules, which allows them to borrow up to 90 per cent of the purchase price of a property. Previously, applicants had to stump up 20 per cent of the value over €220,000.

It means that most of the 2,000 or so claims have been from applicants looking to borrow at least 85 per cent of the purchase price, with 30 per cent looking to borrow more than 90 per cent.

But the figures also point to the depth of some people’s wallets - or the munificence of the bank of mum and dad perhaps. Some 221 applicants borrowed as little as between 70-75 per cent of the purchase price of their property.

Most applicants are claiming between €10-€15,000

The scheme allows applicants to claim as much as 5 per cent of the purchase price back, up to a limit of €20,000, and the figures show that buyers are getting significant rebates back. Some 37 per cent of applicants have gotten between €10-€15,000 back, while 280 applicants got the full amount of €20,000 back, indicating a purchase price of €400,000 or above.