A leading think tank has questioned the decision to boost the Help-to-Buy scheme, saying the move will push up house prices.
It was also argued that the scheme is benefiting large numbers of people who do not need it.
Changes recently announced by Housing Minister Darragh O’Brien mean new buyers can claim up to €30,000 on the incentive. And the Budget extended the scheme to the end of 2021.
But the Economic and Social Research Institute (ESRI) said the incentive disproportionately would benefit those who already had the means to buy a new home.
ESRI economist Barra Roantree said research had shown that 40pc of first-time buyers making a claim under the scheme already had a deposit of at least 20pc before applying.
Under Central Bank rules first-time buyers are required to have only a 10pc deposit before they can be approved for a mortgage.
But Dr Roantree said the scheme would end up benefiting a lot of people who typically had a deposit of more than 10pc already.
The scheme is designed to help first-time buyers fund a deposit for a new home.
Dr Roantree said it would push up demand for housing, at a time when output has fallen back due to the pandemic. The scheme applies only to new homes.
“It is likely to fuel property price growth. So, it will push up prices,” he told an ESRI conference on the impact of Budget 2021.
The latest official figures show that residential property prices fell slightly in July and again in August.
But the ESRI reckons they will now rise due to the changes to the Help-to-Buy scheme.
Finance Minister Paschal Donohoe admitted in August that around 8,000 of the almost 20,000 approved claims to date were made by households that had a loan-to-value ratio of less than 85pc.
This means they already had a deposit of at least 10pc.
The relief was increased last month as part of the July Covid stimulus programme to €30,000, or 10pc of the property value, whichever is the higher.
The ESRI’s comments echo those in a report by the Parliamentary Budget Office last December. It claimed the scheme was priced too generously and “supported a significant number of transactions that would have taken place without the scheme”.
A Department of Housing spokesperson said the extension of the Help-to-Buy scheme is just one of a broad range of steps the Government is taking to improve access to more affordable housing. Budget 2021 provided capital funding of €468m specifically to cover affordability measures.
The Department of Finance denied the scheme has the potential for house price increases.
It said previous work by Indecon Economic Consultants found the main driver of house prices was the mismatch between supply and demand rather than the existence of the scheme. Most of those benefiting from the scheme were on average incomes, it added.
“The aim is to move on from this position as quickly as possible but there is still further progress to be made,” the spokesperson said.