Property agent Savills Ireland has called on the Government to temporarily reduce the VAT rate for construction and also to increase the threshold on the help-to-buy scheme as part of a package of measures to help ease the housing crisis.
Ahead of Budget 2024 next Tuesday, Savills said the construction VAT rate should be cut from the current rate of 13.5 per cent to 9 per cent to stimulate the delivery of new homes.
“While we acknowledge that there are difficult technical challenges to implement this measure, we believe now is the right time to make such a move,” it said, adding that it would benefit thousands of people in need of homes.
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While previous Government-commissioned research ahead of budget 2016 recommended against a reduction in construction VAT at that time, it found that such a measure would be most appropriate in an environment where cost inflation was the primary hindrance to new supply.
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“The current high inflationary environment means that now is the appropriate time to implement this reduction according to the Government’s own research.”
Inflation problem
Savills also said the ceiling on the help-to-buy scheme should be raised from €500,000 to €600,000 to keep pace with inflation. By not increasing the limit in line with inflation, the Government is allowing rising prices to “silently kill” the scheme, it said.
“The fact that it has not increased in the seven years since it was introduced in 2017 suggests that the Government is seeking to silently phase out the scheme, and does not take account of the challenges faced by buyers in saving for a deposit during the current cost of living crisis,” said John Ring, director of research at Savills Ireland.
Its third “key ask” for Budget 2024 is that the Government “properly resource” the bodies tasked with the production of market data, so that it is more up to date.
“The new homes sector has experienced significant challenges, with supply falling critically behind demand. These asks by Savills Ireland are aimed at proactively addressing these challenges and removing barriers to homeownership for the Irish populace,” said Mr Ring.
