FHOG Extended

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From: Ctrader .


I just heard that the First Home Owners Grant is to be extended for another 6 months at a reduced rate of $10,000 for new homes. How does anybody see this impacting on the marketplace and rental vacancy rates?
 
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Reply: 1
From: Peter Davidson


What about the $7,000 grant for existing properties?
 
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Reply: 1.1
From: Gerard C


The $7k for established homes is extended to 30/6/2002. $10k for new also expires 30/6/2002.
 
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Reply: 1.1.1
From: Robert Forward


It's just a political stunt due to the election.

The sooner the government takes away this stupid cash give outs the softer any property bust will be.

A large reason why we've had a HUGE property BOOM is due the FHOG though, there is more reasons then this which has caused the BOOM.

It sure helped though.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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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
 
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Reply: 1.1.1.1.1
From: Sergey Golovin


Well-said Michael.

I just wanted to add that what can you buy with $10K+stamp duty exempt=$14K(?). Well, yes you can buy something at least, but....

Economy is slowing down, what it means? Well, very same people who were just then prime candidates to get a loan are suddenly not any more, simply because they lost they jobs...

Remember that topic we had earlier about US abolition of negative gearing in 1986?
Yes, negative gearing has gone but, casual workforce has increased, they cannot borrow it as easy as used too…they all have to rent or at least half of them.

Serge.
 
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Reply: 2
From: Colin Mills


FHOG is the most annoying thing I've encountered as a landlord since I bought my first IP. My rents are down 20% in Sydneys North Shore and I attribute most if not all the blame to this idiotic free hand out to the building industry.
 
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Reply: 2.1
From: Michael Croft


Yes Colin and what about your capital growth? Are you unhappy about that? Have you put that to good use? If not why not?

Michael Croft
 
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Reply: 1.1.1.1.2
From: Robert Forward


Hi Michael

I agree with most of what you've said there. My point of view though, is, that with the increase in the property values of the lower end of the market has lead to a roll on effect into the middle end of the market (ie: the SYD $300k+ properties).

As these days First Home Owners are spending anywhere up to $250k (average) or above for house and land packages, so the $300k+ properties are not that far out of reach. Which lead to the increase of the middle of the range property prices, which in turn lead to the increase to the upper market property price increase. I see it as a snow ball effect. When the government started giving away the $7k FHOG the value of houses went up by the same amount and only kept going up in price cause there was suddenly a large influx of emotional buyers.

And another benefit within NSW was the extra savings in nil Stamp Duty until you hit the $200k mark for FHO's. Thus saving approx another $7k.

To me, the government should not have interfered with the building industry with these grants cause I believe that all it has done is increase the bubble for the inevitable bust. If they had not have provided the grant with the advent of GST the housing/building sector probably would have recovered already from any slump. Now they are not far from entering into one that may be bigger then any immediate post GST slump would have cause. Put of cause the FHOG was only a VOTE buyer from the government not to save the building industry.

A little story of a friend of mine and building a home with a FHOG.

They have purchase out in the western suburbs (Campbelltown way) and the banks have done a valuation and refused to allow a LVR of 90% on the property because they believe the value of the LAND will drop over the next 12 months. This was a formal written letter back to my friends.

What the FHOG has done is raised the level of LAND to hugely inflated levels that can't be sustained.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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