First Home Owner Grant may be creating property bubble

Posted on April 14, 2009 by peter 
Filed under Australia Real Estate News · Tagged: , , ,

property-crashIt’s now being reported by some analysts that there is sufficient evidence to suggest that the first-home-owner grant scheme is creating a new ‘property bubble’.

Will the government extend the inflated first-home-owner incentives beyond June 30? At the moment, first-home owners buying existing homes get $14,000 from the government. Previously they were getting $7000. If they buy a new home, they get $21,000.
The problem is that most experts think (and history agrees) the handouts simply push up prices. And house prices will drop if the incentives aren’t maintained.
Aussie Home Loans founder John Symond wants the federal government to extend the incentive package but only to those buying new homes.
“By giving the double grant on existing homes, it’s causing prices to go up by an amount greater, in my opinion, than the grant. So young people are paying $20,000 to $30,000, maybe even more, to get into a home. But they’re only getting their $14,000 [grant]. I don’t think it’s a good deal,” he says.
“That grant can’t go for ever and as soon as that’s pulled away, there’s a real danger of those [existing] property values dropping by 5 per cent or 10 per cent. Certainly the government needs to pr ov id e stimulus and the best way of doing that is to give the double grant … to first-home buyers buying a new property. That way it creates jobs and … takes some pressure off the rental problems by creating new housing.”

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