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Staff Reporter
The Australian housing industry would be irreparably damaged if the federal government was to abolish the First Home Owners Grant (FHOG), 1300HomeLoan has claimed.
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1300 HomeLoan managing director John Kolenda said under new revisions to the national scheme that will come into force in July, first home buyers would not receive any grants on the purchase of established homes.
Mr Kolenda said there was now speculation the federal government could abolish the FHOG scheme completely as it looks for measures in the May 14 budget to offset a $12 billion loss in revenue.
“The implications have far reaching effects as any withdrawal of the existing grant and hesitance to reintroduce one for existing homes will deeply impact the broader economy,” he said.
“It has a very deep knock-on effect which flows right across the economy including manufacturing, construction and employment and could be potentially devastating.
“The grant has proven historically to be a very positive stimulus as evidenced in 2008/2009 when we had record numbers of first home buyers taking advantage of the FHOG. This also triggers additional revenue generation for the government via tax and GST which is what they desperately need.
“First home buyers are already struggling to enter the market due to tighter lending practices from the banks and difficulties saving for a deposit.
“With the government’s exclusion of established homes from the eligibility criteria for the FHOG, the first home buyer market has already been restricted.
“At the very least, the entire housing industry faces some seriously damaging consequences if the FHOG goes completely.”
Mr Kolenda said industry experts were already reporting a negative trend in the market due to changes in the national scheme enforced by the government late last year.
In October 2012, the $7,000 grant was replaced by a $15,000 grant that could only be used on newly built homes or on building a new home.
“History suggests that most first home buyers will purchase an established home rather than build their own,” Mr Kolenda said.
“Current data shows a decline in the purchase of new homes, and that targeting the grant to newly-constructed buildings hasn’t had the effect anticipated.
“In New South Wales, first home grant recipients fell from 2,631 in March 2012 to a record low 624 in March this year, while in Queensland there was a similar drop, with 217 grants recorded in the December quarter - down from approximately 4,500 in prior December quarters.
“And according to the Australian Bureau of Statistics, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments in January 2009 was 26.5 per cent; it now sits at 14.9 per cent as of January this year.
“The government will argue that it is still too early to see the positive flow-on they are trying to create in the construction industry but it is very clear that the real estate industry has suffered.”
