AKC News // Government prepares boost for homebuyers

The government is considering moves to spur activity in the housing market, as part of a package of measures to stimulate the economy.

Taoiseach Brian Cowen has asked for detailed plans to be prepared over the summer, and the first moves are likely to be announced next month.

A range of measures that could help first-time buyers back into the market are being examined, including an expansion and restructuring of the affordable housing scheme.

This would allow homebuyers to purchase a wider range of properties assisted by a state equity stake. The Construction Industry Federation, meanwhile, is pressing for an expansion of the role of the Housing Finance Agency (HFA),which it believes could become much more active in providing loans through local authorities to first-time buyers.

Government officials have held discussions with some banks about the possibility of state guarantees for certain classes of loans, which they hope could restore liquidity to the market.

The British government is considering a government guarantee on bonds issued by banks linked to mortgages as a way to promote liquidity, although the likely attitude of the Irish government to such an approach is not yet clear.

A number of informed sources confirmed that a housing package aimed at stabilising the market was being drawn up and discussed by officials and policymakers at the highest levels. They emphasised that it was part of a wider consideration of measures which could stimulate growth and restore competitiveness. The government is likely to consider it formally in September.

It is understood that discussions have taken place with representatives of the construction industry, some senior bankers, the National Treasury Management Agency and various arms of government including the Departments of Finance and Environment and the Affordable Homes Partnership.

The measures are likely to be unveiled by the government in the autumn as it seeks to respond to the rapidly deteriorating economic circumstances. Tax revenues slumped again last month and experts project that the exchequer will be more than Ä4 billion worse-off than expected by the end of the year.

It now appears inevitable that the EUís 3 per cent borrowing limit will be breached next year.

Senior sources believe that finance minister Brian Lenihan will seek to maintain investment levels under the National Development Programme (NDP) by opting not to pay the normal 1 per cent of national output into the National Pension Reserve Fund in 2009. Instead the money may be diverted to projects under the NDP.

However, it is now seen as inevitable that some NDP projects will be postponed, with senior officials currently working on a priority list. Ministers will enter a critical phase in the formation of next yearís budget when they return to their desks next month.

Among the items to be considered in the wider economic package are moves to spur competition and hold down prices, with energy costs seen as a priority.

Source: Sunday Business Post by Pat Leahy and Cliff Taylor

Date : 17-08-2008