HomeBuilder grant faces criticism

by Madison Utley15 Jun 2020

While there have been a number of criticisms lobbed at the government’s HomeBuilder grant, including its specific and limited parameters for eligibility, there could also be a longer-term economic impact which has been less discussed. 

According to Eliza Owen, CoreLogic head of research for Australia, the policy largely creates stimulus for those who were planning to build and renovate anyway and, as such, may result in a vacuum effect.

“A vacuum effect describes housing stimulus bringing forward a planned decision to purchase property. It reflects a surge in buyer activity soon after housing grants are made available, and a significant drop in activity thereafter,” Owen explained.

“The implication is that rather than stimulating sustained, new demand, stimulus is simply bringing forward activity to a certain date, where it would likely have occurred over time anyway.”

The timeframe of the HomeBuilder scheme further confirms its target audience will become those who were already prepped to execute their plans, with or without governmental support. 

“The kind of planning and financing that needs to be organised for a six-figure renovation means that it would largely be taken up by those who have already started the process,” said Owen.

“Similarly for home owners, and first home buyers in particular, those looking to commit to a property purchase within the next six months would already have been saving a deposit and primed to buy.”

While Owen noted that the way HomeBuilder could create additional construction would be through directing buyers from established property to new housing, unlike previous stimulus such as the first home owner boost in 2008, she still communicated doubt regarding its overall effectiveness.

“The HomeBuilder package may be limited in its ability to deliver new construction work, because it relies on decisions to purchase and renovate property in a highly uncertain economic climate,” Owen said.

“This is one of the reasons consensus is mounting around social housing being a more efficient use of government expenditure on housing, because it guarantees the upgrade and building of homes through direct expenditure.”