THE Government is resisting requests to extend its highly successful increase in the first-home buyer's grant, raising fears of a housing slump once the scheme is terminated on June 30.
A record 26.5 per cent of new home loans went to first-home buyers in January, and the scheme appears to have reversed a five-year decline in the new home building industry, softening the effects of the recession, The Australian reported.
While Prime Minister Kevin Rudd hailed these results as evidence of the success of the stimulus package, two key ministers sought yesterday to douse expectations the scheme would be extended.
Finance Minister Lindsay Tanner told the National Press Club he was delighted the scheme was being so successful and said its future was open to debate as the May budget was developed.
"But I'd have this to say; it's going to be a very tough budget and there are lots of other issues that we also have to give consideration to. So I don't wish to fuel any expectations about that."
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Courier Mail, 21 Feb 2009 Launching a review of the adequacy of housing supply, Housing Minister Tanya Plibersek said all measures forming part of the economic stimulus package had to have a cut-off date.
"If people are to bring forward their decision to purchase, which is the stimulus effect that we want to have, then the first-home owner's boost has to have an end date," she said.
However, Ms Plibersek said the Government remained open to taking further measures in housing if they were needed to counter the effects of the global financial crisis.
Extending the first-home owner's grant has split the housing industry, with the Housing Industry Association backing the Government's view that the scheme should end as scheduled on June 30, while the Master Builders Association wants it extended to the end of the year.
New housing finance figures released yesterday show the stimulus, which doubled the first-home buyer's grant to $14,000 for people buying established homes and trebled it to $21,000 for people buying new homes, has had a dramatic effect on demand.
The number of first-home buyers has risen from a low of 8818 in August to 12,500 in January, traditionally a quiet month in property markets.
The 6657 loans for new houses in January was 16.9 per cent ahead of the level in September, before the increase in grants for first home buyers was announced.
Housing market 'could end up worse'
The chief executive of the property analysis company Residex, John Edwards, said there was a real danger the termination of the first-home buyers scheme, as unemployment rises, could leave housing markets in a worse state than they were to begin with.
He said the additional demand generated by the scheme had raised prices for the cheapest 25 per cent of the housing market for the past two months, particularly in the non-resource states.
The effect varied from suburb to suburb, but he estimated that in NSW $7000 of the $21,000 boost for buyers of new homes had gone into higher prices.
"If you bring this to a halt before the housing market has sorted itself out while unemployment is rising, and you take the additional demand away, housing prices will fall," he said.
If people who had taken advantage of the scheme lost their jobs, they would find themselves defaulting on loans worth more than they paid for the houses.
Master Builders Association chief economist Peter Jones said he accepted that the incentive must end, but said this should be delayed while the economy remained weak.
Housing Industry Association chief economist Harley Dale said that although the grant had increased the number of new homes being bought by first-home buyers from about 10 per cent to 25 per cent, the housing market could not rely on this demand alone.