First home owner grant won?t cause house price spike

The Housing Industry Association (HIA) has dismissed claims that the government’s first home owner grant (FHOG) boost will worsen home affordability.

Prime Minster Kevin Rudd has been criticised in recent days by some parties who fear the grant increase could cause a house price spike.

“It is difficult to see how a nine-month stimulus from the extra FHOG could lead to a break-out of house price inflation,” HIA managing director Ron Silberberg said.

Even if the additional FHOG was capitalised fully into house prices, the impact on a $400,000 home would be less than four percent – hardly the impetus for a house price boom, the association argued.

“The new FHOG will help to sustain employment in the residential construction industry and provide welcome assistance for many who have been shut out of the housing market,” Mr Silberberg said.