Queensland government’s first-home buyer change nothing but a sop to developers: Terry Ryder
The Queensland government’s plans to fiddle around with property grants provide further evidence that politicians understand little about real estate.
The plan in the first state budget under new Premier Campbell Newman is to eliminate the grant of $7,000 for first-home buyers who buy established homes and provide a $15,000 gift to first-timers who build a new home.
This is nothing other than a sop to developers who make political donations. There’s no benefit in it for anyone else, including first-home buyers.
The clear intention is to push novice buyers into new homes rather than secondhand ones – although buyers who think the issue through will realise they’ll be worse off if they take the bait.
If you’re a first-time buyer with your heart set on building a new home, then you’ll be happy – you’ve just got a $15,000 handout to do what you were planning to do anyway.
But the research shows that most first-home buyers opt for established property. Why? Because it’s significantly cheaper (and often better located), and most first-time buyers have limited capacity. Their big issue is affordability and the $15,000 doesn’t improve the situation.
On average, the difference between a new home and a second-hand one is around $70,000. In some places, like Brisbane’s near-city suburbs, the cost differential is well over $100,000. The $15,000 bribe is a pittance compared with that price disparity.
The politicians will argue that the measure will reactivate the home building industry and create jobs. They’ll probably also peddle the myth that we have a housing shortage, which is what their mates in the development industry keep telling them.
The reality is that many of Queensland’s major markets have had the opposite problem: over-supply. That’s certainly been true of the Gold Coast, the Sunshine Coast and the Fraser Coast, the three leading population growth areas of the state.
Some real estate practitioners argue that while there’s an over-supply of dwellings generally, there’s a shortage of affordable dwellings. But this Queensland measure doesn’t make homes more affordable – it does the opposite by pushing buyers towards the more expensive new-home option.
My analysis of Australian property markets over the years is that government grants have little influence on sales. Prices, interest rates, employment, economic growth and infrastructure development all impact on residential sales, but grants make little difference.
The last time first-home buyers were out and about in serious numbers was in 2009. They were active because prices had fallen in many markets and interest rates had been slashed – and the combination of the two revolutionised affordability.
Some commentators attributed the upturn at that time to the federal government’s first-home owners’ grant, but numerous surveys at that time found that the FHOG was a distant third behind lower prices and sharply lower interest rates in terms of what motivated people to buy.
All types of buyers were active in 2009 – and first-home buyers were only 20-25% of the market. The other 75-80% were buyers not receiving any kind of government grant or stamp duty concession – they were busy because prices and interest rates were attractive.
The Queensland move is another example of politicians tinkering at the edges of problems like affordability and home construction levels.
If politicians genuinely want to make a meaningful difference, which I doubt, they can achieve it by addressing the core problem: the huge component of the cost of new dwellings attributed to government taxes, charges and red tape.
We’re unlikely to see anything along those lines from the Queensland government – or any other government across Australia.Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.
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