FIRST-HOME buyers Lee Brown and Jessica Tompkins are desperately saving for their first home. So, at first glance, it seems odd that they are hoping Kevin Rudd does not extend the boost to the first-home owners grant in the coming budget.Young buyers wary as panic sets in | The Australian
But the Sydney couple say that rather than give young investors a much-needed leg-up in the property market, the grants - which are worth up to $21,000 for those wanting to build a new home - have driven up prices and created panic among those trying to beat the June 30 cut-off.
Prompted, perhaps, by speculation last week that the boost will not be extended beyond June 30, there was a marked increase in the numbers of people at auctions and home inspections in all capital cities over the weekend, despite the Anzac Day holiday.
Auction clearance rates were significantly higher than last weekend in Melbourne, Sydney and Adelaide.
But while there appears to be a last-minute rush among home buyers, the recently engaged Mr Brown and Ms Tompkins are determined not to get in over their heads. Since they began house hunting last October - when Mr Rudd announced the doubling of the $7000 first-home owners grant for established homes, and a tripling for new homes - the asking price of the house and land package they are interested in has risen by $44,000.
Now they hope prices will fall back to more reasonable levels once the boost ends, as property analysts predict. "A lot of young people are panic buying, that is what we have found, particularly in the last couple of months," said Mr Brown, 26, an environmental consultant. "We feel a lot of pressure to buy now or lose out on the $21,000."
Ms Tompkins, who works in marketing, said the couple had expected prices to fall as the global financial crisis took its toll. "We would be better off if they cut the grant because there won't be so many people out there trying to snap up houses," she said.
In Port Melbourne, Ana Laskova, 24, and Dean Pavlickovski, 31, attended an auction for a two-bedroom apartment yesterday, only to watch the property sell for a significantly higher price than they were prepared to pay. "We would like to buy given the extra stimulus, but the grant is not going to make the difference in our decision," Mr Pavlickovski said.
The home buyers have joined a queue of experts condemning the scheme as counter-productive and a waste of public funds. SQM research managing director Louis Christopher said there was a panicked rush of first-home buyers due to speculation the boost was unlikely to be extended.
He said couples such as Jessica and Lee should wait. "Now is not the time for first-home buyers to rush in. If they wait, demand will dry up and prices will fall," he said. "The first-home buyers grant doesn't help housing affordability at all."
Critics argue the grant has artificially raised prices for homes under $500,000, pitted investors against first-home buyers and disrupted the rental market.
"The first-home buyers grant has been counter-productive," said Kevin Lee, head of Smartline Mortgages.
Property analyst Michael Matusik said there were no more first-home buyers in the market than a decade ago and the boost had simply exaggerated prices."It should be called the vendor's grant," he said. "In the outer suburbs of major capital cities the prices went up between $7000 and $14,000 in a 24-hour period immediately after the announcement. There's anecdotal evidence that it has boosted housing construction, but over the longer term all it has done is bring forward construction."
However, Housing Industry Association senior economist Harley Dale said the tripling of the grant for new dwellings had been highly effective in boosting the property market. "It has done a lot to stimulate the property market and has been especially successful in driving first-home buyers to build their own homes," he said. "In the case of first home buyers who are building new homes it isn't just a situation where demand has been brought forward, demand has actually increased."
Open houses across the country have been inundated with potential first-home buyers eager to enter the market before the boost is shut down or decreased.
In Melbourne, real estate agents were surprised by the strong turnout over the weekend, as a higher than anticipated numbers of house-hunters braved heavy downpours and blistering winds to attend inspections. Real estate agent Craig Stephens said the Prime Minister's hints that the grant would expire had prompted a "massive spike" in numbers attending open-house inspections over the weekend.
First Home Loan Specialists Comment
I find this an interesting article given the current situation. This type of lobbying is why I think the Federal Government will take the middle ground and the First Home Owners Grant back to $7,000 for established properties and take some of the heat out of this section of the market.
They will then cut the boost to $14,000 for newly constructed properties and continue this through to 31 December 2009. After that they will end the boost.
For what it is worth that is my opinion.
Greg Brierley
Principal
T: 1300 884 809
E: greg@firsthomeloanspecialist.com.au
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