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for €280,000 and, all of a sudden, it becomes much more affordable. Our focus is on how we spend money and how we use State assets; firstly, to incentivise buildings to get people moving and, secondly, it’s about bringing down the cost of a house to make it more affordable, particularly for a first time buyer. Carol: Tom Parlon of Construction Federation Ireland (CIF), in an interview with our magazine, said that his members were broadly supportive of the plan, in theory, but they are still pushing for some level of incentive i.e. reduction (even temporarily) of the VAT. Is this an option? Minister Coveney: There are number of ways in which we can introduce a help to buy scheme. Robert: Is that similar to the UK system? Minister Coveney: We are unlikely to replicate the UK system, which is the State taking an equity in property. I think we are more likely to look at some kind of a tax rebate system for first time buyers. Carol: Would that only apply to newly built houses? Minister Coveney: I think it has to, because what we don’t want to do is to increase the buying power for first-time buyers in the second time market, which just heats the market which is already over
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heated. Which is bizarre that we have elements of the property market overheated, even though nearly half of the people who would like to buy a house at the moment, the entire first time market can’t afford to get a mortgage to buy most of those houses. Literally there was no building of any note in the big cities for a decade - there is a huge pent-up demand. The problem, in terms of new build, is that the gap between the cost of building a house and what a first time buyer can afford in terms of mortgage is about €40,000 or so, and we need to narrow it. We need to use the kind of measures that I was talking about already, to reduce the cost of building a house. We also need to help first time buyers in terms of affordability to buy; accessing mortgages and raising deposits and so on. It’s not finalised yet but I think the more likely approach will be to not to have VAT exemption actually, because what that would do is benefit everybody. We are trying to improve the capacity of first time buyers to be able to compete in the new house market. We will restrict a tax rebate for firsttime buyers, but it will be the buyer who gets the rebate not the house builder. Michael [Noonan] hasn’t finalised it yet but I think this will be a likely approach. I think we will try to ensure that we help first time buyers to access new homes. The big problem is there aren’t any new homes for them at the moment. When you have first time buyers demanding houses and being able to afford to buy at reasonable price, that is going to drive, in my view, developers to build a lot more houses for that market. I think they can do it quite quickly because we have a lot of planning permissions, we have a lot of our own land and we have lot of developers in my view who have the
capacity to build and finance those projects now, if they feel that there is a quantity of first time buyers to buy them. Anything we do cannot continue to heat up demand, what it has to do is drive supply. If we were to introduce incentives and help to buy schemes for first-time buyers for second-hand houses, I think I would come under a lot of criticism. The big problem here is supply, so everything we need to do needs to be about driving supply; social houses, affordable houses, houses for first-time buyers and houses for families. Robert: What about the private rental sector market? That’s a huge market in the UK, basically where the developer builds solely for the rental market. Minister Coveney: It’s a big part, but I think we have had a broken rental market in Ireland for as long as I can remember. The vast majority of rental properties in Ireland are owned by the landlords, who only have one or two properties, some of them section 23. Some of them just bought an apartment because they were seeing capital appreciation of 10-15 per cent a year and they wanted a stake in that. I think a lot of people who bought apartments over the last 15 years in their 30s or 40s were people who are looking to sell those apartments again at higher price, so the price would keep going up and up. And now they are