‘Helicopter Money’ Drop in Ireland to Boost Bankers and Buildersby
Some first-time buyers to be given tax rebates to lift savings
Cairn Homes, PTSB tipped by analysts to be among winners
Ireland is giving free money to would-be home buyers, and the biggest winners might be bankers and builders.
Irish Finance Minister Michael Noonan on Tuesday laid out plans to give first-time buyers of new homes as much as 20,000 euros ($22,000) in a tax rebate.
“The tax relief offered in the budget for Irish home buyers is as close to ‘helicopter money’ as Europe is likely to see,” said Darren McKinley, an analyst at Merrion Capital in Dublin.
As Irish companies exposed to the U.K. grapple with the decline of sterling, McKinley recommended investors buy stocks including Cairn Homes Plc, a housebuilder, or Permanent TSB Group Holdings Plc, where mortgages make up 85 percent of its loans. Both companies’ shares surged after the budget because Noonan’s measures may help boost home lending and construction.
PTSB shares rose as much 6.2 percent to the highest since May 10 in Dublin trading. Cairn Homes, which is building houses around Dublin, climbed to a six-month high in London.
“Builders should benefit from increased confidence that there will be demand when they begin to build affordable homes,” said Colin Sheridan, an analyst at Davy, the country’s biggest securities firm.
Ireland is in the grip of a housing shortage. With developers still dealing with the legacy of the country’s real estate crash, only about half of the estimated 25,000 new homes that are needed each year are currently being built. Mortgage lending last year amounted to just over 10 percent of the level in 2006, before Ireland’s property bubble popped.
“Giving people more money to compete for limited new builds will drive up prices and help restore developer profits,” said John McCartney, head of research at Savills Plc’s Irish unit. “Unfortunately, this also makes housing less affordable.”
Still, Noonan, who laid out his plans as part of the 2017 budget, says buyers need help.
“There are no starter homes being built in Dublin. Young couples, single people can’t put the deposit together because they are paying so much on rent,” he said in an interview with broadcaster RTE on Wednesday. “This will give a big chunk of money for the deposit.”