The government’s purchase assistance scheme has fueled property inflation as a third of applicants did not need help raising the 10% deposit required to secure a mortgage, it said. we learned.
The conclusion came from the Parliamentary Oireachtas Budget Office (PBO), which conducted an analysis of the scheme from its inception in 2016 until the end of 2021.
The PBO said its findings “suggest the program is poorly targeted” and that 63% of purchase assistance requests last year were for properties valued above the national average price.
“Increasing household purchasing power, while housing supply is constrained, will most likely cause house prices to rise,” the PBO said.
Sinn Féin housing spokesman Eoin Ó Broin said the report shows why the scheme must be scrapped in the next budget.
“More than half of the money to date has gone to households with or above €100,000 [earnings per year],” he said.
Nearly 200 million euros of taxpayers’ money went to people who did not need it to buy their homes.
“The government could have used this money to significantly reduce homelessness.”
According to the Central Statistics Office, house prices in Ireland have risen significantly in recent months, with annual inflation at 14.8%. Since home prices bottomed out in 2013, the cost of buying a home has more than doubled.
The number of applications approved since the introduction of the purchase assistance program until the end of 2021 was 30,963.
Successful applicants can benefit from the program to buy a new property or a self-build, with a maximum amount of €30,000 available.
At the end of 2021, the estimated cost of purchase aid requests was €559.7 million, around 47% above estimates.
The PBO said this overrun was exacerbated by the expansion of the program in 2020, but nevertheless said it “raises concerns about the methodology used to forecast program costs”.
He calculated that 33% of recipients already had the 10% deposit needed for a home by looking at the loan-to-value ratio of mortgages, and could then use the scheme to increase the amount they had for a deposit.
“Purchasing assistance should not be seen as the sole contributor to house price inflation, but should be seen as a partial cause of it.”
In a statement, a finance ministry spokesperson said a formal review of the program was underway and was due to be completed yesterday.
This review aimed to assess the cost-effectiveness of the program and determine if it is still needed.
The spokesperson added: “The future of the Purchase Assistance Scheme beyond its current expiry date of December 31, 2022 is a matter that will need to be considered by the Government as part of the budget process. 2023.”