Auction Politics Return to Ireland in Real Estate Battle

(Bloomberg) -- Ireland’s general election is turning into a race to see who can offer voters the most, and home builders stand to be the biggest winners.

Ahead of the Feb. 8 election, the two political parties jostling to lead the government, Fine Gael and Fianna Fail, are effectively offering free money to would-be homeowners after house prices almost doubled since their 2013 low.

Leo Varadkar’s Fine Gael is proposing to boost a tax repayment for first-time buyers by 50% to 30,000 euros ($33,100). Fianna Fail, the main opposition party, is promising the government will contribute one euro for every three saved, capped at 10,000 euros, for the same group. It will also top up the tax rebate.

Companies like Glenveagh Properties Plc. and Cairn Homes Plc., reliant on first-time buyers to hit their targets, are set to benefit, Ronan Dunphy, an analyst at Investec Plc. in Dublin, said in a note. The measures will eventually fuel demand and prices, analysts say, and Glenveagh shares have gained 4.3% since the election was called on Jan. 14, with Cairn up 2.2%.

For some, the promises are a reminder of the Celtic Tiger years which led to the one of the worst real estate crashes in history.

Auction politics is “ramping up,” said Conall MacCoille, an economist at Davy, Ireland’s biggest securities company. “We will also be looking out for excessive spending commitments that might threaten to fritter away the 3 billion euros budget surplus that we expect in 2020.”

The proposals come as an Irish Times poll showed Fianna Fail holding a narrow lead over Fine Gael in the race to become the biggest party, a position which would place them in the driving seat to form a coalition government.

Government formation, however, may some time, and in the meantime, the proposals could place a brake on the property markets as buyers await for certainty.

“These demand-side supports bring back memories of the 2000s period and will be inflationary to the market,” Goodbody chief economist Dermot O’Leary said in a research note. “But there is a risk that prospective first time buyers may hold off on purchase in the very short-term prior to the introduction of these schemes.”

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