How To Get On the Property Ladder as a First-Time Buyer in 2021
What better way to kickstart the year than by looking forward to purchasing your own home? If you’re a first-time buyer aspiring to get on the property ladder in 2021, these initiatives should give you a leg-up!
To help ease you through the process, this how-to article highlights the obstacles faced by first-time buyers in 2021 and the resources available to help you navigate those barriers to get on the property ladder.
While the continuing COVID-19 pandemic has affected the global and local economy and resulted in mass unemployment and suppressed general spending, it has also prompted the Government to step up on financial incentives to stimulate investment and development in key sectors such as the property market.
Obstacles for First-Time Buyers in 2021, Compounded by COVID-19
- Housing Shortage
Kieran McQuinn from ESRI (Economic & Social Research Institute) highlights the impact of the pandemic on Ireland’s housing supply: “The biggest threat from the pandemic is the risk to housing supply. Ireland’s housing market has suffered from chronic supply shortages over the past number of years and the disruptions to activity which are associated with COVID-19 place further pressure on delivery in the private sector.”
- Rising Property Prices & Reduced Incomes
Alongside the housing shortage, pent-up demand for new homes caused by the lockdown has led to inflated property prices. This affects the ability of certain households to purchase, particularly those living on reduced incomes, which causes a ripple effect on the rental sector and escalates the general cost of living.
- Higher Risks for Banks and Mortgage Providers
Banks and financial institutions are understandably more wary with lending during an economic downturn, particularly to younger individuals who require mortgages for high-value loans due to their limited cash reserves.
- Work-from-Home Requirements
Now that working from home has become the new norm amidst periodic lockdowns, priorities in home requirements have changed to accommodate these new living and working circumstances.
Having sufficient space will now be a key requirement — whether it’s space for a home office, additional study space for the kids, or a small garden to ensure the family has breathing space during those months of hunkering down indoors. More space means higher priced properties, which will require higher value mortgages.
The pandemic has made life more challenging in many different ways, but it has also created unique opportunities for first-time buyers. Here are a few helpful initiatives by the Irish Government that might give you the leg up you need.
Government Initiatives For First-Time Property Buyers
The Help-to-Buy Scheme — a Government tax refund scheme to help first-time buyers secure the required deposit to buy a newly built home — has been extended and enhanced to provide increased relief to help weather the pandemic’s economic impact.
Buyers can now claim a maximum of 10% of the value of the property or €30,000 — whichever is lower — an increase from the original 5%/€20,000 under the original scheme.
Buyers must have paid the equivalent amount of income tax and/or DIRT (Deposit Interest Retention Tax) in the preceding four years in order to be eligible to claim. The now enhanced HTB scheme has also been extended until 31 December 2021 under Budget 2021.
This will provide a valuable incentive for first-time buyers as the tax rebate could theoretically cover the deposit on a new house.
Aspiring homeowners can also apply for a Rebuilding Ireland Home Loan: a Government-backed scheme that offers reduced rate mortgages to first-time buyers who have been refused a mortgage or were offered “insufficient” finance by at least two lenders.
The scheme offers mortgages up to 90% of the market value of the property, which means buyers only need to raise a 10% deposit. The maximum loan amount is determined by where the property is located.
To qualify for a loan, the buyer needs to be in continuous employment for a minimum of two years as the primary earner, or one year as the secondary earner.
What’s interesting to note is that the Help to Buy scheme can be used in conjunction with the Rebuilding Ireland loan, which means that eligible borrowers can claim back the deposit amounting to 10% of the property value or €30,000 (whichever is lower) in addition to getting the reduced rate mortgage.
The recently introduced New Affordable Housing Scheme is a shared equity scheme designed to assist buyers who would otherwise not be able to afford to buy a home.
Under the scheme, which is expected to launch in summer of 2021, the state takes an equity loan share of up to 30% of the property value while the owner secures a mortgage with a bank on the remainder.
The scheme will be open to all new build homes subject to price caps and is targeted at first-time buyers. It will run in conjunction with the Help-to-Buy initiative, without any arbitrary salary caps. Keep an eye out for more details on the scheme in the coming months.
This tax-free savings scheme is designed specifically for savers aged between 18 and 40 who are saving up for their first home or for retirement. The government offers a 25% bonus on money saved, up to a maximum of €1,000 a year, which can help boost your savings efforts.
Despite the challenging times we’re living in, it’s always good to look at alternative ways to navigate the obstacles we’re faced with. If you’re just starting out on your journey towards becoming a home-owner, you might find this first-time buyer checklist a helpful guide.