FHOG to go Indefinitely!!!

From: DB Bear


I heard on the late night news last night that the government has decided to let the First Home Owners Grant (FHOG) go on indefinitely.

Any comments anyone?????


Deb
Melbourne Freestyler Co-ordinator
www.freestyler.net.au

* * * Vote 1 - The Bear - Best Co-ordinator * * *
 
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Reply: 1
From: Nigel W


No answers yet...but these are some of my questions.


will this prolong the boom? or at least flatten out and soften any drop in the housing led economy?

IS there still enough demand to keep bringing forward by 1-2 years those first home buyers who haven't saved enough deposit?

Will the proliferation of "we'll double the govt grant" builders lead to people with negative equity out on the city fringes?

Is the grant just resulting in an artificial price stimulation of all property both new and old?

Is it actually not having much of an effect at all, with the dominant factor instead being record low interest rates and the plethora of house/auction/reno/lifestyle shows/magazines out now?

If supply can largely be increased only by building up or going to the city fringes (excluding the minimal effect of the knockdown and build option which is becoming popular in Sydney) what impact will this boost in demand have? Will it be largely irrelevant for the established house market as new buyers can't afford mid-inner suburbs even with the grant? Will it lead to an accelerated growth rate for inner suburbs units as the first home buyers chase a limited supply of old, large, solid units that have been refurbed? (gee I hope so!)

On a more macro level, is it good policy to artificially stimulate the housing industry with this grant until it becomes addicted to subsidies like a heroin user!? Is it time with increasing interest rates and the falling demand for new dwellings for some Darwinian evolution and survival of the fittest in the building indusry?

Would it be better for the economy as a whole for the weak builders and associated industries to be culled from the herd by elimination of the grant alltogether combined with an interest rate rise?

Is the grant just a trend accentuator within the broader industry and economic cycles?

Will the perceived end of double digit returns from the stockmarket keep pushing people into bricks and mortar investments?

where's that damn crystal ball?
 
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Reply: 1.1
From: DB Bear


What about this ... INSTEAD of removing or reducing stamp duty, the government will keep the FHOG.

What about: The government is concerned about the negative publicity that the removal of the FHOG will cause, so they are keeping it?

Any more theories?

Deb
Melbourne Freestyler Co-ordinator
www.freestyler.net.au

* * * Vote 1 - The Bear - Best Co-ordinator * * *
 
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Reply: 1.1.1
From: Nigel W


DB

I'm not going to speculate about the ulterior political motives which are probably one of the primary drivers of the continuation - or perhaps more accurately the political fall out from the impact on the voters and the economy (in that order) of removal...

I just think that in the long term it is BAD policy and BAD for the health of the economy as a whole to be artificially stimulating any one sector, particularly one that doesn't export...its unsustainable.
 
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Reply: 1.1.1.1
From: Simon St John


Nigel

I agree with your point. Artificial stimulation one one sector is not a good move.

The FHOG distorts the economy and it has to end. If the Government claims it's continuing "indefinitely", then it smells even more of political expediency.

It might also suggest they are concerned that without the grant the fundamental weaknesses in the economy are greater than current stats suggest.

Remove stamp duty if you want to stimulate the housing sector. After, it's just another distortion of the economy itself!

Just my thoughts.....

Cheers, Simon
 
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Reply: 1.1.1.1.1
From: Gordon Austin


I think we will see a lot of distress sales in the next few years. The grant only covers a small part of the property purchaser in larger cities. I can't help but think that many first home onwners are overborrowing.

GA
 
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Reply: 1.1.1.1.1.1
From: J Parker


I agree with Gordon here in that the grant is looked upon now as somewhat a "freebie" by the govt- just another handout. There is no doubt that it has helped push prices up in the boom, particularly in those lower-priced areas.

I support the abolition of stamp duty instead. It makes more sense for govt to support all home buyers to buy more, not just those embarking on their first piece of property. This would serve to stimulate the economy as well, as it would see those otherwise not interested investors taking advantage of the absence of stamp duty.

The trouble with the grant is that, in an economy of rising interest rates, those very people who couldn't save for a deposit in the first place will have a lot of trouble coping with higher repayments, because they've maxed themselves to the hilt.

Just some ramblings anyway.......
Cheers, Jacque :)
 
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