Reply: 1.1.1.1
From: Michael Croft
Hi Robert,
Do you really think the FHOG makes a difference to established homes at $300k plus? I don't think so and that's a significant chunk of established homes in Melbourne and Sydney. OK so it might explain a 2 or 3% spike in prices but the big picture is much more than the FHOG.
For example a 1% drop in rates on a $100,000 mortgage might save you $1,000 a year in interest. It will also save $$ on your credit card and car loan etc.
The effect of a 1% rate cut on loan serviceability and hence borrowing capacity may be as high 20%. In other words assuming a $200,000 loan on a $300k home, it may mean that the punters can now "afford" to pay an extra $40,000 for it. Hey presto, the $300,000 house now sells for $340,000. Sort of makes the $7,000 FHOG look insignificant doesn't it?
Then add to the picture a dozen other variables like; consumer sentiment, share market collapse/volatility, tax incentives (the family home is still cap gains exempt), IP seminar growth, etc., and you start to put the FHOG in its place.
Yes it's pork barrelling and sucking up to the housing industry, but that's about it. New homes are only a part of the market. There is more money spent on renovating and extending than on new homes and I also suspect the number sales of established housing is far greater than that of new.
regards, Michael Croft