The Department of Finance has said it intends to review the help-to-buy scheme introduced in the budget to eliminate any "potential abuses".
The department was responding to the publication of warnings issued by its own officials before the scheme was introduced that it could be used by EU nationals to buy properties outside Ireland.
“We committed to a review of the scheme during Finance Bill debates and that review will take place next year,” the department said in a statement.
The officials' concerns, contained in pre-budget advice released under the Freedom of Information Act, led them to urge Minister for Finance Michael Noonan not to introduce the scheme at all.
In the event, the scheme, which allows for first-time buyers to recoup up to €20,000 in a tax refund to put towards the cost of purchasing a property, was included as part of the October budget.
On Sunday, however, in response to queries from The Irish Times, the department said the scheme was limited and “temporary in nature”.
“The Department of Finance identified policy concerns with intervening in the housing market,” it said in a statement.
“Factoring in a broad range of policy considerations, Minister Noonan brought forward a Help-to-Buy Scheme to support first-time buyers but that incorporated a number of design features to mitigate against the concerns raised.”
Ongoing monitoring
The department said the scheme was temporary, only applied to new builds, was capped and excluded cash buyers.
“The scheme is closed-ended and temporary in nature in any case. The scheme will be monitored. Therefore, with a short run, an early review and ongoing monitoring, any potential abuses can be quickly rooted out,” the statement said.
However, it also said: “Although it must be said, citizens exercising their rights under law are not abuses.”
The documents obtained by The Irish Times show that Mr Noonan believed the scheme could drive up demand, helping make it more attractive to developers to build homes for first-time buyers.
A pledge to introduce a help-to-buy scheme had been included in the programme for government and was intended to help first-time buyers overcome difficulties in accumulating a mortgage because of Central Bank rules which were in place at the time. Those rules have since been relaxed.
However, Mr Noonan’s officials were not convinced.
“It is not clear what market failure would be addressed by the proposed tax relief,” officials wrote to him a month before the budget.
“Ultimately, it is not clear whether such an incentive would reduce the numbers in the rental market or instead lead to greater competition for certain properties, thus driving up the cost of homes without having any impact on supply.”
The Sunday Times reported that officials had also warned that the scheme could enable EU nationals who had paid tax in Ireland to avail of the scheme to buy properties elsewhere.
