Michael Noonan (Limerick City, Fine Gael)
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I move amendment No. 16:

In page 9, to delete lines 24 to 31 and substitute the following:“ ‘qualifying residence’ means—

(a) a new building which was not, at any time, used, or suitable for use, as a dwelling, or

(b) a building which was not, at any time, in whole or in part, used, or suitable for use, as a dwelling and which has been converted for use as a dwelling,

and—

(i) which is occupied as the sole or main residence of a first-time purchaser,

(ii) in respect of which the construction work is subject to the rate of tax specified in section 46(1)(c) of the Value-Added Tax Consolidation Act 2010, and

(iii) where the purchase value is not greater than—

(I) where in the period commencing on 19 July 2016 and ending on 31 December 2016, a contract referred to in subsection (3)(a) is entered into between a claimant and a qualifying contractor or the first tranche of a qualifying loan referred to in subsection (3)(b) is drawn down by a claimant, €600,000, or

(II) in all other cases, €500,000;”.

I apologise for delaying proceedings. The amendment introduces two important changes to the definition of "qualifying residence". The first change will ensure that the conversion of buildings which were not previously used as a dwelling will be accommodated under the help-to-buy scheme. Such new living accommodation would constitute additional supply, in a similar manner to the more traditional new builds envisaged for the scheme. For example, it is not uncommon for older industrial buildings such as warehouses to be converted into apartments and the legislation, as published, would not have permitted such conversions to qualify for the help-to-buy scheme.

The second change within the definition of "qualifying residence" is in response to calls to reduce the upper price or value threshold that can qualify for tax relief under the scheme. Having listened carefully to the comments of my parliamentary colleagues on the scheme, I am proposing a change such that, from 1 January 2017, the upper limit for the purposes of the scheme will be reduced to €500,000. Given the legitimate expectations of those who may have made purchasing decisions or entered into commitments to self-build following the announcement of the scheme in the budget, I propose to allow the original cap of €600,000, as announced, to remain applicable in respect of relevant qualifying homes up to 31 December 2016.

I will explain the reasons I do not propose to reduce the upper limit for qualifying under the scheme from €600,000 to €400,000. If I were to reduce the cap to €400,000, a person who bought a house for €400,000 would receive €20,000, whereas a person who bought a house for €410,000 would not receive any benefit under the scheme. This would create a cliff effect above the €400,000 cap. It was necessary, therefore, to have some margin in place above €400,000 to make the scheme operable. One can argue about how far would one go in this respect.

A second issue also arises. When grants applied and a limit was imposed on the price of houses to which a grant applied, a lump of money was paid under the table when the limit was exceeded. If a cut-off point is applied close to the figure of €400,000, people would make up the difference in cash and the real price of the house could be €500,000. This would incentivise a black economy in house prices. Nobody will receive 10% of €500,000. Instead, a person paying €500,000 for a house will receive 10% of €400,000, provided the price paid for the house is less than €500,000. I took advice on this matter from colleagues more than from anybody in the trade. Many of my colleagues believed that a €600,000 ceiling was too high. That is fair enough and we have proposed to reduce it to €600,000. Nevertheless, where people have entered into commitments under the understanding that the ceiling would be €600,000, this must be honoured. As a result, I am proposing that the change to €500,000 will take effect on 1 January next.