First home buyer grant aimed at boosting construction off to a sluggish start

FEWER than 400 first home buyers have been paid a $15,000 grant introduced by the NSW government last October as a centrepiece of its plans to stimulate the new housing market.

The Treasurer, Mike Baird, announced in last year’s budget the $7000 grant for first home buyers of new and existing properties would be axed from September 30. It was replaced with the $15,000 benefit for first home buyers who purchase newly built dwellings or off-the plan properties valued at up to $650,000.

At the time, Mr Baird said he expected the new grant, along with other measures, to stimulate the construction of new dwellings in NSW.

But figures supplied by the Office of State Revenue reveal that in October, the first month the new grant was available, only 50 were paid. In November, 156 grants were paid and in December, 172.

This compares with 233 grants paid to first home owners for new homes in October 2011, under the old scheme (although these figures include grants applied for in previous months). In November of that year, 293 grants were paid, while the figure for December was 237.

Mr Baird argued the latest figures were an improvement on the previous year.

”Housing finance and first home owner grants are both up for new dwellings so early evidence suggests our policy of targeting incentives to improve supply is working,” he said.

For the three months to the end of 2011, only 763 of the grants were for new houses, whereas the figure for the same period last year is 1090. However, the 2012 figure includes grants carried over from under the old scheme.

Saul Eslake, the chief economist at Bank of America Merrill Lynch, said the figures showed ”a slow start” for the scheme.

Mr Eslake said that first home owner grants were ”a complete waste of money” as they inflate the price of housing and do very little to increase home ownership.

However, he strongly supported the NSW government’s decision to replace the $7000 grant for existing homes with the $15,000 grant for new properties.

”If you are going to waste money in this way, at least by restricting it to people who buy new houses you are no longer bumping up the price of established dwellings and at least providing some inducement for the purchase of new housing,” Mr Eslake said.

The slow initial take-up of the grant may have to do with the general apprehension of would-be home buyers across Australia, Mr Eslake suggested.

The reasons for this included people being reluctant to take on more debt, a higher level of unemployment among younger people and a belief that house prices have yet to bottom out.

Data released by the Bureau of Statistics two weeks ago showed the number of home loans taken out by first home buyers in NSW fell to a 20-year-low in November. Just 1383 home loans were taken out.

The original release of this article first appeared on the website of Hangzhou Night Net.

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