First Home Owners Grant impact on market?

[Kieran]

I am a New Zealand property investor and our government is considering introducing a first home owners grant to assist first home buyers to buy their first home.

I have been asked what impact this could have on the property market. Some concern has been mooted that this policy may alter the long term income and welfare structure of the population... and consequences might include a glut of houses for sale on the market, and house prices tumbling when all those being helped decide to take any capital gain and sell up. I disagree with these suggested consequences.

In my opinion we would probably see prices rising strongly in the short term on the back of the increased demand from all of the "new" buyers introduced to the market as a result of the grant empowering them to become homeowners.

I understood this is what happened in Australia when your government introduced a 1st Home Buyers Grant but how much impact did it really have? Especially in the larger centres like Sydney, Melbourne etc and how much has it impacted on vacancy rates?

 

[Pele]

Pele

Gday

The FHOG was brought in in a rising property market. I think its effect on the vacancy rate was negligible. Also I am unanaware of the market being flooded by people selling there first home just becasue it wetn up 30%. Personally i am dead set against the FHOG. My theory is that becasue most first home owners are competing for the same types of houses in the same areas all the grant did was boost house prices in those areas by $7k. Total waste of govt funds. Someone please pick to pieces my pov becasue i cringe when the govt p*sses money up the wall like this.

Pele.

 

[Simon]

NZ FHOG

As a broker I have seen it help many people into homes which they may not otherwise have got into. There were many places here under $140K which meant the FHOG was 5% down. These places are rapidly dissappearing.

I think if I was an investor in NZ I would be identifying some places at the cheaper end of the market.

Cheers,

 

[Peter_Tersteeg]

Hi Kieran,

This is all speculation and I don't have any solid analysis to suport this, but these ideas may be worth considering:

FHOG has bought a significant number of people into the purchasing market earlier than the would have, as some lenders have allowed the grant to contribute to the initial deposit. Some buyers are able to purchase a house without any deposit at all. This has possibly had a negative effect on the rental market.

FHOG has not made it cheaper to own a property, as the extra demand has pushed prices up well past the $ amount of the grant.

When the FHOG offer is withdrawn, the buyers who were able to make their purchase earlier than they would have, will have already purchased. This may have a negative effect on the purchasing market, but a positive effect on the rental market.

Basically, I believe it has made housing less affordable, but it has made it easier to get into your own home.

 

[sbe]

My 2.2c (inc GST)

Yes, it has impacted on vacancy rates, as it's pulled a lot of people out of being renters into owners. Great for them, not so good for empty properties. Vacancy rates are up everywhere.

It has effectively accelerated these people into homes by putting them a good 2-5 years ahead on savings. For one family alone doesn't impact, but do that for anyone who hasn't owned a home and it makes an impact on tomorrow (something gov't aren't renowned for taking notice of - no votes in it)

I agree with the other points raised though.
1. Helped to raise lower end prices through competition
2. Brought forward demand. If they ever stop the FHOG, it will take some time to resettle back. Lowering it as they did is there way of trying to ease it out without making the backside fall out of the market.
3. Many of these people are in financially by the skin of their teeth. A decent interest rate rise and they'll lose it. I feel sorry for these people if this happens.

Personally - I think it's great to see people in their own homes, but only if they can afford it. Devastating to lose their homes I would think. With developers also "matching" the FHOG, you've got a lot of people buying homes bigger than they need, with a deposit they could never save (ie can't budget or save). Time will tell the true impact.

 

[Marco]

FHOG

Thought provoking post Kieran,

Its a interesting economic concept though. An initial grant of $7K for established homes and $14K for new developments proves to aid the push of the property growth cycle. (this as well as other elements, eg, low interest rates)

It did and does give first timers a great leg up and basically in somes cases nulifies the Stamp duty taxed by the government.

Therefore, depending on the value of the property bought (e.g $350K which was close to med for Syd at the time,) the goverment gives out $7K then reclaimes back $11K for Stamp still making $4K of it all.

With demand high causing the booming increased sales I doubt if the goverment lost much revenue at all, in fact perhaps this as well as a huge turnaround in the Building industry (even with big insurers going down) they increased revenue ?

Of course I have no statistical data to back any of this up. Like sbe, it's my 2c (GST exempt)

Anyway,
Keep in mind that Politicians have Investment Properties too !

Marco

 

[geoffw]

Re: FHOG

Originally posted by Marco
Therefore, depending on the value of the property bought (e.g $350K which was close to med for Syd at the time,) the goverment gives out $7K then reclaimes back $11K for Stamp still making $4K of it all.

Just a slight quibble here. The FHOG was a Federal Government thing, while Stamp Duty is state based- so it's going from one government to another, not keeping within the system.

Wasn't GST supposed to have benefited the states so much, they would not need to levy stamp duty?

 

[bundy1964]

Re: Re: FHOG

Originally posted by geoffw
Wasn't GST supposed to have benefited the states so much, they would not need to levy stamp duty?

Hi GW

Wasnt that placed in the same filing cabinet with "No child shall live in poverty"

bundy

 

[geoffw]

It certainly was in that same cabinet Bundy.

In the end, it doesn't matter what is promised, or who you vote for- a politician gets in.

Frankly, I suspect there's members of this forum, who although they have a deep distrust of Reals Estate agents, may actually prefer to see the country run by RE Agents than by politicians.

Well, maybe not

 

[bundy1964]

He He GW

It could be worse a F/P could take over ( one of the 99.9% )

I even get to vote in 3 council elections this year........is there a space for none of the above on the voting papers

bundy

 

[JoannaK]

Re: Re: FHOG

Originally posted by geoffw
Wasn't GST supposed to have benefited the states so much, they would not need to levy stamp duty?

You're right there Geoff. Bob Carr was on the radio the other day and he copped an earbashing about stamp duty and excuse is that it is now paying for all the hospitals and schools.

Typical politicians!