The ongoing housing crisis continues to worsen, with the supply of new homes persistently falling short of the escalating demand. Savills Ireland is putting forth three key asks to address this crisis effectively:

1. Temporary Reduction in Construction VAT Rate: We propose a reduction in the construction VAT rate from the current 13.5% to 9.0% in order to help facilitate 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, ultimately benefiting thousands of people in need of homes. Previous research commissioned by the Government in advance of Budget 2016 recommended against a reduction in the VAT, finding that such a measure would be most appropriate in an environment where construction cost inflation was the primary hindrance to new supply – which was not the case at that time. However, the current high inflationary environment means that now is the appropriate time to implement this reduction according to the Government’s own research.
2. Increase in the Help-to-Buy Scheme threshold: The disruptions caused by the pandemic, combined with rising construction costs and inflation, have further resulted in inadequate new home deliveries. Thus, we urge the Government to increase the ceiling of €500,000 for the Help-to-Buy scheme. Since the measure was introduced in January 2017, consumer inflation (HICP) has increased by 20%, meaning the limit for help-to-buy should have increased to €600,000 to keep pace with inflation. Designed as a measure to help people bridge the deposit gap when buying a new home, the current inflationary environment means that saving for a deposit has become even more challenging. Of course, construction cost inflation has risen even faster than general inflation, pushing a lot of homes above the €500,000 threshold. By not increasing the limit with inflation since it was introduced seven years ago, the Government is choosing to allow inflation to silently kill the help-to-buy scheme, which is regretful given how popular and successful it has proven to be both with buyers and industry.
3. Increase resources for the provision of data services: Given the current housing crisis, it is essential that we have up-to-date and robust information systems in place to allow public policy and business decisions be made on a sound evidence-based footing. For example, the RTB’s rental report is typically six months out of date when released, with Q1 2023 information still the latest information available on the rental market. This is just one example of where serious informational deficiencies are in place in Ireland’s housing market. We call on the Minister to properly resource the various Government bodies responsible for the production of the market information to address this important issue.

John Ring, Director of Research at Savills Ireland comments:

“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. The Government’s own research on the VAT rate shows that now is the time to cut it from 13.5% to 9.0%, while the limit for the Help-to-Buy needs to be expanded in-line with inflation to keep alive this effective policy measure. 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.”