THE First Home Owner's Grant may become a $25 billion time bomb and make it even tougher for people to get their first house. As the development industry called for an extension of the $14,000 grant to all homebuyers to stimulate a dormant market, Reserve Bank deputy governor Ric Battellino warned the funding could backfire.
Analysts also forecast a potential housing crisis later this year with rising unemployment pushing up to 460,000 households "close to the edge" through mortgage stress.
Mr Battellino said the $21,000 available to first-home buyers could end up being priced into the cost of the home.
"It doesn't take long for the average house price to increase by $20,000 and leave the buyers no better off," he said. Forecasts were for a "substantial rise in unemployment", he added.
Human Resource manager Emma Holmes, 26, moved into her first home, a unit at Seaton, less than two weeks ago and described the grant as a "massive boost".
"It was great because it basically covers stamp duty and fees, the sorts of costs that creep up on you a bit," she said.
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Ms R "I'd hate to see it not around after June, because too many people will miss out."
Stock market analysts ABN Amro said the first-home owner segment was becoming "inherently risky".
"The confluence of artificially high housing prices, lack of savings record and higher unemployment risk makes the first-home buyer segment a high-risk segment," he said.
Economists Fujitsu Consulting said it expected to see a significant rise in mortgage stress this year.