Australian Broker forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Confusion reigns over fate of boosted FHOG

Notify me of new replies via email
Australian Broker | 24 Apr 2009, 09:00 AM Agree 0
Yesterday the prime minister indicated the boosted first home owners grant would not be extended beyond the 30 June. Today, reports in the Daily Telegraph and Herald Sun suggested it would be extended when the Budget is announced on 12 May.

  • Angela Trzan | 24 Apr 2009, 02:06 PM Agree 0
    What better way to stimulate the economy? helps tradesman, first home buyers, brokers, agents and the general economy. It is simply too onerous for first home buyers to try and break into the housing market on their own. Can't really see a downside to extending the grant.
  • Rhys | 24 Apr 2009, 02:34 PM Agree 0
    They have no more money to spend... If they stopped handing out money maybe they could have extended it.
  • Dave | 24 Apr 2009, 02:42 PM Agree 0
    The grant should extended for construction only
  • Albert | 24 Apr 2009, 02:47 PM Agree 0
    Giving more and more grants is a bit like the dog chasing its tail. The more grants we get, the higher house prices go, so we need more grants to keep the housing industry going. Whether we like it or not, we need a reasonable correction in the housing market to get long term affordability back, not bandaid measures to 'stimulate' the economy. If, as the K Rudd Governnment keeps saying, we are heading for >7% unemployment, the last thing we need is higher motgages to feed the ever growing house prices. House prices will fall, sure, but where is it written that buying an owner occupied house is a guarantee of making large amounts of tax free money overnight. It means we probably need now more than ever to slow things down rather than wait for the inevitable collapse.
  • Gazman | 24 Apr 2009, 03:07 PM Agree 0
    Ruddie might be right in part here. The Govt should reduce the FHOG back to $7k on established properties and make the FHO save and this may allow the lenders to go back to 95% with genuine savings instead of the 90% (or are they just trying to stem the flow so they can catch up with the back log)
    The boost for construction should remain in order to stimulate construction growth in the economy but maybe allowing the lender to put 90% restrictions on this level, so some hurt money is injected but the FHB. I keep reading the demand is out numbering supply so we need to encourage building. Maybe some tax relief for the investor might also help this situation.
  • Michael N | 24 Apr 2009, 03:13 PM Agree 0
    There are many people that can afford a property as they have multiple income in the family. However, the majority Have Savings but it is not Genuine. That will put them out now because almost everybody is asking for 5% genuine savings.
  • GB | 24 Apr 2009, 03:36 PM Agree 0
    We are facing a situation where the FHOG is predominately driving business volumes in the country. No funds have yet materialised for infrastructure projects nor any real information on how these funds will be distributed and by whom. Until that spending gets underway, unless the FHOG is extended there is nothing to underpin the growth in the economy. There has been no significant measures to support small - medium business who are the primary employers in the country so consequently businesses are reluctant to spend and therefore the whole cycle of contraction continues. My view is that the grants should be broadened to provide greater equity so that any person who has not received a grant before for a owner occupied purchase should be entitled to one once in their lifetime. Luck & economic prosperity of the time will determine what level of grant that could be made available. This would mean a lot more people would consider buying and generate greater opportunities for all.This would be far more effective means of generating demand than an occasional handout for plasmas & pokies.
  • Martin | 24 Apr 2009, 03:46 PM Agree 0
    Rudd will wait and see what everyone says, then make the most popular decision...isn't this his only tactic? Who voted for these cretins?
  • Jerry Gibb | 24 Apr 2009, 03:49 PM Agree 0
    At the end of the day with the Banks cutting LVRs back and wanting savings deposits the only place that the FHO will be able to go at the end of the day will be back to Keystart which is not a bad product but how long will the state be able to fund all the applications that come its way before it too changes its policies?
  • Martin Castilla | 24 Apr 2009, 04:16 PM Agree 0
    The primary casualty of the (mooted) FHOG Boost withdrawal is the low income/low savings FHB, who'll find it near impossible to exit the rental market into home ownership given increasing rents while supposedly genuinely saving 5%, and increasing house prices. I don't believe we'll have a 'price correction' following withdrawal of FHBs from the market because investors will become even more active, and hold values up (certainly in most suburbia). FHBs signing building contracts certainly should receive a higher value grant, given the extra economic benefit they represent. As has been written elsewhere, I reckon the Govt. will hold off till the last moment to announce they will continue handing out 'something' beyond June 30th, and milk the good news for all it's worth. It’s pure politics.
  • Lilly | 24 Apr 2009, 04:27 PM Agree 0
    If they extend on the 21,000 on construction only, this will help create more jobs and help with the shortage of housing that we face in Western Australia.
  • Noel Brown | 24 Apr 2009, 04:39 PM Agree 0
    Confusion is right - another example of the KRudd regime not knowing which turn to take. In essence the earlier increase in FHOG grant to another $7000 for an existing property was never the right decision to "stimulate" the economy. The only way to "stimulate" was to massage the new construction of homes and not existing stock which had been hard to sell. What stimlulous can you get from something that is already erected (well - with exceptions). Best resove is to cut out the extra FHOG of $7000for existing property and allow if for new construction only - that way the building industry gets some stimulous and when it's all said and done the building industry largely supports local cconomies which must be supported wherever possible.
  • Mortgage Manager | 24 Apr 2009, 06:14 PM Agree 0
    It should be extended for construction only. With the LVRs being reduced, and with talk of them reducing further, it only makes Krudd sound 'good' if he extends it. It is not achieving any form of stimulus.
  • John Moulds | 24 Apr 2009, 07:32 PM Agree 0
    All the latest FHOG extra money has done is inflate the market which whenever it is dropped will cause house prices to fall and leave the first home buyers vulnerable in that market. That is what happened in the sub prime market in USA. Return to the original FHOG system now before too much damage is done.
  • Grahame and Rochelle | 25 Apr 2009, 10:15 AM Agree 0
    If the government is serious about protecting jobs then there is a fantastic solution that will not only protect jobs but also solve the housing shortage they rave on about. It'll benefit first home buyers, investors, and put something back in the pockets of hard working tax payers whilst solving the problem of reduced LVR's and making lending easier. The answer is get rid of the fhog and rebate GST for anyone constructing a residential dwelling.
  • Gavin Maslen | 27 Apr 2009, 12:30 PM Agree 0
    Regarding this
    "Critics argue the scheme is creating a false market bubble and may be putting people in homes they could otherwise not afford" -
    Lenders for the most part are now only really going to 90%, rather than 95% or 100% LVR's. There are still a few exceptions to that practice, but not too many.
    In Victoria, a $300k house will need a contribution closer to $43,500 (@90%LVR), than $28,500 (@95%LVR).
    In short, it's harder than every to obtain finance, even with the grant doubled, as it is now.
    For this reason, I fail to see how the grant is causing a bubble. What the government has given on one hand, the lenders have now evened this out with lender policy changes such as the maximum LVR's. If anything is causing houses to appreciate artificially, it could be that the cost of money is far cheaper than it was 8 months ago. If the Grant is removed, I don't accept the arguement that it's because of a big bubble. It doesn't make sense to me.

  • brizbroker | 27 Apr 2009, 02:44 PM Agree 0
    Gavin, there are a number of sensible,compelling reasons why many people believe the First Home Owners Grant and Boost has contributed to a dangerous bubble in the market. You are right in saying that lately it's harder to obtain finance for first home buyers, but you have forgotten that LVR/Gen savings changes have only started to affect first home buyers very recently. Until very recently, products/policies such as 100%/No Deposit/ 97 plus LMI /Non Gen Savings etc, were freely available, at discounted rates/pro pack rates etc...Hundreds and thousands of loans/purchases had already occurred before the recent restrictions. Those policies were available and there to be used, so thats fair play, but then add a 14K FHOG, and there's your bubble builder. Ask any real estate agent about property in the sub 500K market in a major city- mini boom. This is reinforced by statistics from the Office Of State Revenue which show quite clearly that the overwhelming majority of "boost" applicants submitted applications for the 7K boost (for existing dwellings) rather than the 14K boost (for new dwellings), so the boost hasn't been reaching its preferred target - new dwellings,meaning more buyers for the same amount of stock, which equals an artificial, unsustainable appreciation in prices. I have to disagree with your argument that "cheaper money" is the cause of the bubble. It has contributed but its not the real cause. Yes,someone on 80K can borrow more now than a year ago, but they still had to be able to qualify for a loan. The banks policies combined with a boosted FHOG are what got the customers into a loan. So people who had no real track record borrowing large sums of money have been allowed to...and round and round we go in a mad rush before June 30. More buyers qualifying for bigger loans = more cashed up buyers on a deadline competing for limited stock (almost all of it sub 500K,almost all borrowers without gen savings, almost all high LVR, where if one or both of the buyers in a couple, lose a job..???) = BUBBLE
  • SCUBY | 28 Apr 2009, 10:25 AM Agree 0
Post a reply