New Government scheme to help first time buyers - Advice to avoid

Bronte

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I cannot believe after the previous bubble, after all the people that over stretched before, with the current bubble, that any sane person in Government could possible come up with another hair brained schemd to inflate a worsening situation in Dublin.

Even Karl Deeter, who posts on here occassionally and who is in the mortgage business, and would benefit from this, has come out strongly against the scheme on ethical ground, for which I admire him. No doubt he has many clients ruing the day they every purchased.

http://www.independent.ie/opinion/analysis/this-country-is-one-big-gamble-on-rising-property-prices-30272274.html

Truly Minister Noonan is a shocking disgrace

http://www.irishtimes.com/business/economy/noonan-dismisses-fears-of-housing-bubble-1.1793791

So my advice to first time buyers is not to head this help. 5% deposit might seem like a great idea, but it is not. It means you borrow more, borrowing more is not a good thing. It means that proeprty costs more, because people can borrow more. Dublin is already overheating, this will only make it worse.

Any of the other AAM's have an opinion or Burgess? (I don't think I mentioned house prices other than within the rules, if I did please delete)
 
It's a ridiculous idea that solves nothing. There isn't a problem with First Time Buyers getting mortgages. The issue in Dublin is simpy that there is not adequate supply. This will do nothing to address this. The cost of building houses is also still too high and is simply uneconomical at current prices for many developers. Then there is the issue of developers getting finance to develop the landbanks that they might be sitting on. Then there is the problem that there is a lot of land with planning permission for stuff like apartments and small houses which is not what is needed. What is the Government doing about all this?

There is no property bubble in Ireland but there is a dysfunctional market and Government interference like this will do nothing to solve that.
 
Ronan Lyons economist at Daft.ie was on TV the other night explaining how the problem with the property market now is that costs are too high, the revenue side (the selling price of new houses) is ok according to him.

Well a typical 3 bed semi in any city outside Dublin sells for less than the cost to build at the moment without any allowance for site cost.
 
Agree, a politically driven idea ahead of Euro elections to benefit the government and banks, no one else. Hopefully this ill fated and conceived idea will fall flat on its face like the lending to small business guarantee (not saying that is ill fated or conceived).
 
Here's the problem.............

Building houses has become more expensive in recent years. Development levies, VAT and more onerous requirements under the latest building regulations means that it has become too costly to build houses at a profit.
Obviously we all know that sales prices have collapsed by 50% in the last six years too which aint helping. In many parts of the country houses are selling for less than the cost of construction. Obviously that situation cant remain.

So what does the government decide to do. It decides to make the situation worse/better. The government will make it easier for 1st time buyers to get a mortgage on NEW houses. This will increase the demand and drive prices up. Once prices have been driven up, Developers can get back in the game and start producing the houses that are needed at a profit.

The government will be smiling from ear to ear picking up the vat receipts and corporation tax and increased income tax take from construction workers. The local authorities will be picking up the development levy and
1st time buyers will be working from dawn to dusk to pay for it all.

Simple isn't it......
 
As a potential FTB I also don't like this idea... if I can't save enough for a deposit myself as it is then surely I shouldn't be leveraging debt (as much as I can avoid) on top of everything else.
 
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Here's the problem.............

Building houses has become more expensive in recent years. Development levies, VAT and more onerous requirements under the latest building regulations means that it has become too costly to build houses at a profit.
Obviously we all know that sales prices have collapsed by 50% in the last six years too which aint helping. In many parts of the country houses are selling for less than the cost of construction. Obviously that situation cant remain.

So what does the government decide to do. It decides to make the situation worse/better. The government will make it easier for 1st time buyers to get a mortgage on NEW houses. This will increase the demand and drive prices up. Once prices have been driven up, Developers can get back in the game and start producing the houses that are needed at a profit.

The government will be smiling from ear to ear picking up the vat receipts and corporation tax and increased income tax take from construction workers. The local authorities will be picking up the development levy and
1st time buyers will be working from dawn to dusk to pay for it all.

Simple isn't it......

House of Cards II
 
Awesome. I just need a 100% increase in property prices, time it correctly and sell my place to repay the mortgage! I just need a few years of it!
 
The government should reduce the various taxes that push the price of new builds up so much that developers cannot make profits on them at the current prices.
It is ridiculous that any government should try and fund itself based on levies and taxes that occur soley due to people taking on debt.

Also interesting that the side effect of encouraging people to take on more debt would be to reduce disposable income and push up wages, strangling the local enconomy and making the country less competitive if wages increase!
 
It is ridiculous that any government should try and fund itself based on levies and taxes that occur soley due to people taking on debt.
The government doesn't (and won't be on the basis of this dubious policy) "fund itself based on levies and taxes that occur solely due to people taking on debt".
You can find a month by month breakdown of where the government income comes from here


While lowering taxes to stimulate growth would be lovely and welcomed by all and sundry, as it stands the country is still borrowing to fund current expenditure, there is very little scope for reducing taxes as you suggest - unless you wish also to make even more austere cuts into basic expenditure (health and social welfare especially).
 
If this was really about helping FTBs to get on the property ladder then why does this proposal guarantee a portion of the deposit on new builds only?

I've been looking to move house & there is a problem with supply. Too few on the market because of arrears, negative equity and half the mortgages in the country being trackers. People either can't or won't put their house on the market.

If people who already have apartments & houses were able to move it would free up the system. Providing new homes for FTBs won't alter the reasons for the existing bottleneck in supply.
 
I genuinely think it is a crazy idea. I maybe a bit old fashioned but I think we need to go back to the 20% deposit idea.
Do people want to be encouraged back into the unaffordable mortgage scenario again.
I know the difficulty of saving a 20% for a deposit as I have been there. It might seem painful for 3 to 5 years but in the long term it is a more sustainable route to go.
SVR mortgages will eventually rise and I do not want to see the turmoil that people are going through repeated again.
I agree with Dr Debt about the effect charges and the new Build Reg's are having on build costs and not to mention Irish Water have increased new connection charges substantially. What has this got to do with saving water.
 
The other issue there is nowhere for mature Down-sizers/Empty-nesters to move to should they wish.
Everything is geared towards the mortgage-holding FTB'er.
There could be an incentives scheme to build attractive low-density 2-bed cottage style Retirement Villages, that might help the supply side.
 
Has the smell of playing more politics .
Has the smell of old Fianna Fial tricks.

How does setting up a system that guarantees a price increase helps anyone.
From the Press the big shortage supply is in Dublin.
I see no comments supporting it , do not think we are all wrong.

Why not Levy unused sites in Dublin 5% for 1st year idle then 1% per year ?
That would quickly get activity.
Or what am I missing?
 
While lowering taxes to stimulate growth would be lovely and welcomed by all and sundry, as it stands the country is still borrowing to fund current expenditure, there is very little scope for reducing taxes as you suggest - unless you wish also to make even more austere cuts into basic expenditure (health and social welfare especially).

If I had a plan that could magically lower taxes without cuts I'd be shoving my face on elections posters already. I think this current plan to supposedly help FTB's in irresponsible.

Granted soley was an exageration, however this government does seem intent on repeating the mistakes of the past by encouraging increases in household debt.

Td's keep parroting on about a functioning property market but seem to be thinking that back in 2005 we had one?


"Chambers Ireland today has revealed that income from development contributions has risen from €0.11bn to €0.55bn between 2000 and 2005 and now represent 13.6% of local government expenditure."
 
Has the smell of playing more politics .
Has the smell of old Fianna Fial tricks.

How does setting up a system that guarantees a price increase helps anyone.
From the Press the big shortage supply is in Dublin.
I see no comments supporting it , do not think we are all wrong.

Why not Levy unused sites in Dublin 5% for 1st year idle then 1% per year ?
That would quickly get activity.
Or what am I missing?

Pretty much everyone thinks it's a bad idea except the CIF. Funny, that. Now, who has a very active and well ensconced lobbyist, FTBs or the CIF?

That tells the story. Much as the solution to unaffordable house prices in the boom was to force more credit on people (and have the state take on some risk) rather than reduce prices, now the solution apparently to low supply in Dublin is to increase demand, which might increase supply. It's perverse.

Simply put, the government are not on the side of the people.
 
Even Karl Deeter, who posts on here occassionally and who is in the mortgage business, and would benefit from this, has come out strongly against the scheme on ethical ground, for which I admire him. No doubt he has many clients ruing the day they every purchased.

He is also in the bankruptcy advice business now. It reminds me of those pubs down in villages that also have an undertakers business on the side.

It does seem like a bizarre idea. It's like that phrase "build it and they shall come"... more like give them money and they shall build!
 
The cost of building houses is also still too high and is simply uneconomical at current prices for many developers.

Then there is the problem that there is a lot of land with planning permission for stuff like apartments and small houses which is not what is needed.

Surely in Dublin they could build and make a profit now?

I don't think you'll see anything except apartments and small houses being built inside the m50 in the future except in premium developments. They don't need to be shoe boxes but we need higher density, well thought out housing.
 
This plan does appear to be ill thought out! There is an obvious problem in the current level of supply of new houses in the Dublin area. No real indication of supply problem outside of the Capital. While acknowledging the risk of Government intervention in the market, I also accept the need to incentivise both banks and developers to accelerate level of new builds. This method appears to be a blunt instrument which may or may not alleviate the direct pronlem, but could lead to a false asking level on the new builds (remember the good old days when house prices were based on ability to obtain 100% mortgages!).
What is needed is more focussed direct incentives to builder/developers. This needs to be at a level where the incentives do not lead to overpriced properties. There are ways of doing this, using a little bit of imagination, but this is not the way!
 
What is needed is more focussed direct incentives to builder/developers. This needs to be at a level where the incentives do not lead to overpriced properties. There are ways of doing this, using a little bit of imagination, but this is not the way!

There is a shortage of houses, in Dublin, at least.

There are many unemployed construction workers.

There are many undeveloped residential sites.

I don't like the government's proposals to guarantee loans. Noonan said that people need 20% deposit. They don't. Most banks are lending 90%. I don't think that availability of finance is the problem, so I don't think that this scheme will work.

Is there any scope for government intervention to get houses built? I don't like the government intervening, but it's got some big advantages

  • it improves the supply of houses
  • it gets people back to work
  • it increases government revenue in terms of paye and VAT

Each of the following ideas has drawbacks as well.

1) Build social housing
2) Reduce VAT on new house builds (Or reduce other taxes such as development levies)
3) Bring in grants for first time buyers of new builds
4) Bring in grants for all buyers of new builds
5) Bring in mortgage interest relief for buyers of new houses
6) Guarantee 10% of the mortgage on new builds in exchange for the lender giving a discount on its SVR
7) Give tax incentives to property investors to build new properties to rent to rent allowance tenants for 10 years
 
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