The Help to Buy scheme was “poorly targeted” at its aim of helping first time buyers raise a deposit, as a third of recipients did not need assistance and could instead use the scheme to create larger deposits for more expensive properties, a report by the Parliamentary Budget Office (PBO) has found.
The report provides an overview of the Help to Buy Scheme from 2016-2021, during which time there were 30,963 claims.
The scheme is intended to help first time buyers raise a deposit to purchase or build a new house or apartment.
The report found some claimants were purchasing more expensive than average properties and already had the required minimum ten per cent deposit.
The majority (63 per cent) of claims in 2021 were for properties valued above the national average price of €290,000.
This suggested the scheme was “poorly targeted towards its stated aim,” and a third of recipients who did not need assistance to meet their deposit requirement could instead use the scheme to create larger deposits.
“Increasing purchasing power for households, while housing supply is constrained, will very likely lead to higher house prices,” the report stated.
Such rises in house prices were “likely in turn to exacerbate affordability problems down the line.”
This was of concern in areas where the Help to Buy claims are highest, most notably Dublin, the Dublin commuter belt and Cork.
There has been a “very small increase in prices attributable to the introduction of the Help to Buy incentive,” evidence provided in the 2017 and 2018 Indecon reports and 2021 Tax Strategy report state.
Both reports note the primary driver of house prices remains wider economic conditions and demand versus supply. However, there was “merit in continuing to monitor the Help to Buy relationship with property inflation”, the Oireachtas PBO report said.
The scheme has been extremely popular since its introduction and has seen a dramatic increase in claims since 2016. It is estimated to have cost 43 per cent more than originally estimated, as the level of demand experienced was not forecast in cost projections.
By the end of 2021, the estimated total cost of approved Help to Buy claims was €559.7 million. This “raised concerns on the methodology used to forecast the costs of the scheme,” the report stated.
Successful applicants can avail of a maximum amount of €30,000. The average value of a claim in 2021 was €24,300.
Dublin and Cork alone accounted for 70 per cent of the claims.
The scheme is intended to support the building of properties. However, there is no estimation of additional properties mentioned in the report as there was “no clear method which could show the number of additional units arising from the scheme, as opposed to those which would have been delivered anyway.”
The Help to Buy scheme is set to be independently reviewed and is currently due to be completed at the end of the year.
