Analysts say Fine Gael and Fianna Fáil election pledges to first-time buyers would push prices up

Overview of Proposed Housing Support Measures

Fine Gael and Fianna Fáil have both committed to enhancing support for first-time homebuyers by expanding existing government schemes. Fine Gael plans to increase the Help to Buy grant by one-third, raising it from €30,000 to €40,000. This scheme provides a direct financial boost to buyers purchasing new homes.

Both parties also propose extending the First Homes shared equity scheme to include second-hand properties. Currently, this scheme allows the state to buy up to a 30% stake in new or self-built homes, reducing the upfront cost for buyers. Extending it to the second-hand market aims to help buyers in areas where new construction is limited.

Fianna Fáil additionally promises to “protect and extend” Help to Buy, reinforcing its commitment to demand-side subsidies. These policies are designed to make homeownership more accessible, particularly for young and first-time buyers.

Expert Analysis: Potential Inflationary Effects on Housing Prices

Several housing market analysts have expressed concerns that these measures could inadvertently increase house prices. The Economic and Social Research Institute (ESRI) has previously warned that Help to Buy tends to inflate prices for new builds due to constrained supply and strong demand.

Lorcan Sirr, a senior lecturer at TU Dublin, describes the proposals as “classic auction politics,” suggesting they use young buyers as political tools. He explains that increasing the Help to Buy grant would likely have an immediate inflationary impact, as developers might raise prices to capture the increased subsidy.

Extending shared equity to second-hand homes could also push prices up, though more gradually. Sirr notes this would particularly affect smaller homes, which are typically targeted by first-time buyers, because more buyers with greater financial support would compete for the same properties.

Barra Roantree, assistant professor of economics at Trinity College Dublin, echoes these concerns. She emphasizes that while these subsidies benefit some buyers, they do not address the fundamental problem: insufficient housing supply. Roantree argues that demand-side subsidies like Help to Buy are not the solution; instead, efforts should focus on making homebuilding easier and more affordable.

Perspectives from the Real Estate Sector

Kevin Delappe, director of Brocke Delappe estate agents in Dublin, offers a nuanced view. He believes the market may have reached an affordability ceiling, limiting how much prices can rise despite increased subsidies.

Delappe welcomes the additional support for first-time buyers, noting it could provide more purchasing options. However, he cautions that the shared equity extension’s effectiveness might be constrained by the condition of many second-hand homes. Many such properties require significant modernization, and without assistance for refurbishment costs, buyers could face substantial out-of-pocket expenses.

He also highlights that a significant portion of second-hand sales involve probate properties or landlords exiting the market, which could further complicate the impact of shared equity on prices and accessibility.

Government Response and Policy Justifications

At Fine Gael’s housing policy launch, Minister for Public Expenditure Paschal Donohoe addressed concerns about inflationary effects. He stressed that increasing housing supply remains the best way to improve affordability.

Donohoe clarified that Help to Buy would continue to apply only to new builds and noted that the proposed increase to €40,000 is smaller than the 50% hike from €20,000 to €30,000 implemented in 2020.

He also pointed out that the First Homes shared equity scheme includes price caps ranging from €350,000 in rural counties to €475,000–€500,000 in Dublin and Cork, which are intended to limit inflationary pressures on both new and second-hand homes.

Taoiseach Simon Harris emphasized that protecting first-time buyers is a red line for Fine Gael in coalition negotiations, signaling the party’s commitment to these policies despite criticism.

Opposition Views and Alternative Approaches

Opposition parties such as Sinn Féin and Labour have taken a different stance, pledging to phase out the Help to Buy scheme altogether. They argue that demand-side subsidies distort the market and do not resolve the underlying shortage of housing.

These parties advocate for policies focused on increasing housing supply through regulatory reform, incentivizing construction, and reducing building costs to make homes more affordable in the long term.

The debate highlights a fundamental divide in Irish housing policy: whether to prioritize immediate financial support for buyers or to focus on structural changes to boost supply and affordability sustainably.

What this means

The housing affordability crisis in Ireland presents a complex challenge that demands balanced solutions. While Fine Gael and Fianna Fáil’s election pledges to increase financial support for first-time buyers through expanded Help to Buy grants and shared equity schemes aim to ease immediate barriers, experts caution that these measures risk inflating prices without addressing the fundamental supply shortage. The debate underscores the tension between short-term relief and long-term sustainability in housing policy. Ultimately, meaningful progress will likely require a multifaceted approach that combines targeted buyer support with robust efforts to increase housing supply, streamline construction processes, and ensure homes are both affordable and accessible for future generations.