Is Victoria's enlarged FHO grant a waste of taxpayer dollars?

by Mackenzie McCarty06 May 2013

In a recent effort to pump up the state’s housing industry and offset the slowdown in the economy, the Victorian government increased the First Home Owner’s grant. From July 1, the grant will be increased from $7,000 to $10,000 for newly constructed homes and stamp duty for all first purchases will be decreased by 40%.

But while many first home buyers will be celebrating, Wealth Within chief analyst and regular ASX newsletter contributor, Dale Gillham, says he sees the move as a step in the wrong direction.

“I question whether this will achieve anything other than force families to move further out from the city and put pressure on resources by increasing urban sprawl. Today, people want to have access to good roads, public transport, shopping and entertainment and don’t want to have to wait years for it.”

He says the Victorian government has scrapped the original $7,000 grant, which allowed first home buyers the choice of either purchasing a new or an established property and replaced it with a $10,000 grant that can only be used to purchase new homes.

“Unfortunately, this limits first home buyers taking advantage of the grant to outlying suburbs like Cranbourne or Craigieburn and not everyone starting out wants that.”

In an interview with ABC News, Victorian Treasurer, Michael O'Brien claims families will be thousands of dollars better off.

"The average price of a newly constructed first home is about $400,000," he says. “With these announcements, Victorian families will be over $16,500 better off with the combination of the increased grant and the stamp duty cuts."

Yet, the question Gillham and others in the housing industry want answered is whether families will actually take advantage of the new offer, or whether it’s a waste of taxpayer money.

“If you choose to live way out in newly developing estates where supporting infrastructure can take years to eventuate, you have to question what you’re really getting for your money,” Gillham argues. “Perhaps better value can be found by looking closer in. More and more people are choosing new apartment-style living because they can immediately access established infrastructure, including shopping, restaurants and entertainment, good roads, trains, trams and bike tracks. All of this you as a tax payer have already paid for.”

COMMENTS

  • by Patrick 6/05/2013 11:22:55 AM

    Maybe a first home should be an apartment purchased by a single person. If all did this then, if necessary, 2 apartments could be sold when the time came to buy a family home.

  • by Country Broker 6/05/2013 11:24:56 AM

    I understan what Gilliam is saying but his comments are so City centered .

    Yes there will be some savings in the outer suburbs , but more in regional Victoria where the avarage entry will be about 330,000 , this initative is a much need boost to regional Victoria,

    Can these commentators think aboutn the state as a whole not just Melbourne .

  • by Its Now 6/05/2013 2:11:49 PM

    This scheme which is now operating in Qld has been a flop (6.4% take up compared to the average 15%). ALL first home buyers should benefit from a Government Grant and not just new homes. We have gone so far backwards with these incentives. I bought my first home in for $53,000 in 1983 when Bob Hawke was prime minister. The avearge price of a home then was $67,000. Back then you recieved $4000 for a couple and $7000 if you had children. The average price of a home now is around the $490,000 mark. Very poor on all governments behalf