Home grant lift help affordability

(AAP) The federal government's $1.5 billion boost to the first home buyers grants scheme has aroused concerns that housing affordability will only worsen as a result.

But the changes, announced as part of a $10.4 billion stimulus package aimed at
protecting the Australian economy during the global financial crisis, are welcomed
by the housing industry.
Under the plan, first home buyers who purchase a newly constructed dwelling are now
eligible for grants of up to $21,000, an increase of $14,000.
Grants for first home buyers who purchase established homes have been doubled to
$14,000.
The changes, effective immediately, will apply to all contracts entered into by June
30 next year.
Prime Minister Kevin Rudd said more than 150,000 first home buyers would benefit
from the changes which were aimed at strengthening "this important sector of the
economy".
"Housing and the construction sector and private dwellings investment are important
generators of economic activity in this country," Mr Rudd said.
"They are also important for the wellbeing and the living standards of Australians."
However, there are concerns that increasing the grant for buyers of existing
dwellings would simply damage housing affordability.
ANZ chief economist Saul Eslake said he was sceptical about the merits of increasing
the first home owners grant for buyers of existing dwellings.
"I have no particular problem in the circumstances about the trebling of the first
home owner grant for purchasers of new dwellings," Mr Eslake said.
Boosting the grant for purchasers of new dwellings would increase housing activity
in 2008-09, he said.
"On the other hand, I struggle to find a plausible justification for doubling the
grant for buyers of established dwellings," Mr Eslake said.
"My general view is that measures which initially put cash into the hands of home
buyers, in effect, put the cash into the pockets of home sellers."
Mr Eslake said adding the equivalent amount of money to the national rental
affordability scheme would have been more effective in improving housing
affordability.
Westpac economist Matthew Hassan said past increases in first home buyer grants had
been priced in by the market.
"It has been the tendency, certainly in the past, for first home owners grants and
stamp duty concessions and the like to be priced in by the market pretty quickly."
The grant boosts were welcomed by the construction industry, which said they would
help boost housing supply levels.
"Certainly we believe the primary beneficiary of today's announcement would be first
home buyers, whether they be purchasers of new or existing homes," HIA spokesman
Chris Lamont said.
"We don't believe you'll see people making wholesale speculation investment
decisions ... because of credit rationing being the way it is, the banks are being
more selective in who they're lending to."
Housing Minister Tanya Plibersek said the increase in the size of the grants would
provide a much-needed boost to confidence in the housing market.
"While our housing market hasn't seen the turbulence of overseas markets, lending
finance for owner-occupied housing did fall by 2.1 per cent in August against July,"
Ms Plibersek said.
Approvals for new dwellings had also fallen, slipping 3.7 per cent compared to July,
she said.