MEDIA RELEASE

THREE MONTH EXTENSION TO FIRST HOME OWNER GRANT FALLS SHORT OF THE MARK

13 May 2009 – The Rudd Government’s 2009 Budget announcement extending the First Home Owner Grant (FHOG) for a further three months is a waste of time and money, according to leading real estate investment specialist and founder of new property and research website, www.findinvestmentproperty.com.au, Mark Mendel.

He believes an extension of three years would be the best way to address Sydney’s ongoing housing shortage, which the National Housing Supply Council estimates could reach 800,000 properties by 2028.

“Residential development is simply not being built anywhere near the rate at which it is needed. The government’s First Home Owner Grant has gone a long way towards addressing the problem and stimulating the construction of new homes,” Mr Mendel said.

“Why such a successful initiative is to be scrapped so soon after it has been implemented is of great concern and will certainly put the brakes on new residential construction.”

Since it was introduced in 2008, approximately 59,000 Australians have benefited from the First Home Owner Grant, with the ABS reporting that the proportion of first home buyers represented 27.3% of all new loans in March 2009 –the highest number since the ABS started collecting data.

Mr Mendel believes that only grants for new homes should be extended, as established housing does not need the same level of assistance from the government.

“New property is always a little more expensive then established homes, so it makes sense for the government to concentrate solely on this type of property purchase. Such a move would ease the severe shortage that is likely to occur, while also helping to boost the economy and reduce unemployment,” he said.

Mendel argues that the growing costs of building –both in labour and materials, will continue to hinder new home construction and is yet another reason why this sector needs ongoing help from the government.

He adds that ABS statistics showing a rise of 3.5% in building approvals for March 2009 following an overall decline in the 12 months prior reflects the length of time it takes before an increase in approvals can be seen after initial implementation of the FHOG scheme in late 2008.

“The initial reaction from October’s FHOG release has only been seen in March 2009, some six months later. Extending the grant for such a short period of time won’t allow any new developments to get off the ground and achieve pre-sales and early sales as the grant expires too quickly,” Mendel said.

“This leaves developers in a position where they are not going to try and rush an approval through council in the hope that they may or may not meet the short deadlines.”

Mendel believes that rather than spending $7,000 for established housing over the next three months followed by $3,500 for a further three months, these funds should have been put towards the new home grant only.

“This move would have also worked to stimulate the economy as thousands of jobs will be lost if the construction industry comes to a grinding halt,” he said.

Mendel adds that the additional First Home Bonus, which is issued to home buyers through each State Government on top of the FHOG, should continue however it should be funded by the Federal Government.

“The FHOG was implemented by the Rudd Government in response to the Global Financial Crisis, therefore all funds dispersed to First Home Owners should come from Federal Funds,” Mendel said.


“The Federal Government is not committed to helping Australians over the long term and is essentially leaving it up to individual states to decide if they can help their residents.”

If additional assistance is required by first home owners after the FHOG is reduced, it rests on State Governments to continue their first home owners’ bonus, which will put them further into debt.

“Victoria has already committed to continuing its bonus for a year after the FHOG scheme is reduced, with other states likely to be forced into a similar situation,” Mendel said.

FHOG for new homes will continue at the current rate of $21,000 until September 30, 2009, before it is halved for purchases made up to the end of December 2009. After this date, the original first home owner’s grant of $7000 will be implemented.