Where did the $7 BILLION go?

[Timmy]

Read an interesting statistic the other day....

The government has officially handed out 1,000,000 First Home Owner's Grants (FHOG). And with the average amount being $7,000, this amounts to over SEVEN BILLION DOLLARS in FHOG's!

Now for some discussion...

1) What has this money actually done? Has it helped first home buyers, or has it simply increased property prices by an extra $7 Billion over the last few years?

I would suggest that this money has simply slipped through the hands of those for which it was intended and has now ended up with property sellers, investors (who held property over this time), land rats (PM's charging extra commissions), state governments (Bracksy is killing us down here with stamp duty), BANKS (makin' more with the extra lending) and possibly builders and developers. I doubt that it has really helped home owners as a whole especially with debt levels now apparently out of control etc.

2) Is this really a beneficial use of tax-payer money? With all the talk of affordable housing, the government has single-handedly increased the price of residential property by $7 Billion. It seems to have had the opposite effect.

$7 Billion is a lot of money. I'd like to think that something slightly more constructive could have been done with this money?

3) Is housing affordability really an issue that can be solved, or is it simply an oxy-moron? I think it's obvious that more money doesn't work (regardless of where this money comes from. eg. work, FHOG, sharemarket, savings etc).

Vacancy rates are very low, so obviously someone can afford this unaffordable property. (I've made this point before, everything is affordable for somebody).

Or is the issue as simple as....

X number of people want to live in suburb A. Suburb A can hold 0.1X number of people, therefore 0.9X number of people complain that housing is unaffordable.

And as the population grows, and more people desire a nice location to live in, that ratio is going to change. (eg. 0.01X and 0.99X)

(This example would be especially true for many parts of Melbourne.)

Thoughts, ideas, comments?

 

[Sunfish]

Timmy, most of the post is beyond me. I really don't know what effect FHOG has had and I don't wish to speculate.

3) Is housing affordability really an issue that can be solved,

I am more willing to venture here and say that it isn't a big issue. Apart from an anonomolous, recent, period it has never been easy to buy your first house. I know it was hard for me 40 years ago. And I know that the pollie's suggestions are crap. They pretend that they can choose where inflation bulges but they can't. It is absurd to think that they can engineer a "friendly" inflation in the assets we invest in, (the stock market?) but not in the assets someone wishes to buy into (a home?). Even if they could, booming stock prices cut the dividend return of everyone's super funds and let's be sure of one thing: In the long term, dividends are the ONLY real return on investment, and any investment that is never going to pay a dividend is worth exactly ZERO. A corporate raider will only pay a premium for your company if they see positive cash returns, ie a DIVIDEND.

 

[kingchevy]

From someone who has taken advantage of the 14,000 fhog in 2000 mate I know exactly were the money has got me it is a foot in the door for my own financial freedom. Same as it will help a lot of other people who are having trouble saving there deposit for there first house. maybe you have not seen how hard it is on the other side of the fence for some people just trying to make a living. I think you sound more like you didn't get a chance to get you're hands on the fhog and are unhappy you missed out or perhaps you don't see the real benefit of the fhog I don't think the housing price's would have boomed as much as the have if it hadn't been for fhog. The simple fact is the fhog is one of the best policies our goverment has and a great help to people getting into there first house.

 

[Sunfish]

The FHOG was in fact a CORE PROMISE from Howard to get the GST through senate.

And it is logical. Housing is not exempt from GST so, in an attempt to return a little of the GST paid on housing, they refunded a little of this on a once only basis. There is far more than $7k GST on new houses. So it hasn't cost 7 bil.

Edit: My Lady questions the accuracy of this, (the bit I deleted) and I bow to a better memory. LOL

I think blaming FHOG for "unaffordability" is intellectually lazy.

 

[Ricardo29]

""Or is the issue as simple as....

X number of people want to live in suburb A. Suburb A can hold 0.1X number of people, therefore 0.9X number of people complain that housing is unaffordable.

And as the population grows, and more people desire a nice location to live in, that ratio is going to change. (eg. 0.01X and 0.99X) ""


yes.
a home is as cheap as you want it to be, but no 18-30yr old wants to live 60km down the freeway in some far flung outer suburb that has nothing going for it. its that simple
my oldies moved to a far flung outer suburb when i was born (all of 11kms from the cbd). i wouldnt be seen or caught dead even thinking of visiting or living in that suburb nowadays....and im at the very very low end of snobbery and spoon-fed.

 

[bythebay]

The FHOG was in fact a CORE PROMISE from Howard to get the GST through senate.

And it is logical. Housing is not exempt from GST so, in an attempt to return a little of the GST paid on housing, they refunded a little of this on a once only basis. There is far more than $7k GST on new houses. So it hasn't cost 7 bil.

Edit: My Lady questions the accuracy of this, (the bit I deleted) and I bow to a better memory. LOL

I think blaming FHOG for "unaffordability" is intellectually lazy.

I was originally going to stick up for the FHOG - it helped me get my foot in the door like kingchevy said. But that being said, I have paid more than $7k in GST many times over. GST is supposed to be neutral for business, but basically it's just another cost I have to pay when my BAS comes around every 3 months
If I could have all that money back, I may even have another property. 10% of all my sales, ouch :S.

 

[dave99]

I think the FHOG has nothing to do with GST and everything to do with politics. The vast majority of sales are of houses more than 7 years old which never had GST paid on them. It is a way for the govt to say they are doing something.

BUT, I do think that the FHOG has not increased prices appreciably, for 2 reasons:
1. First home owners form only 20% of the market, and are concentrated at certain price points, so their ability to affect the overall medians is limited.
2. Most people I know used the FHOG not to increase the amount loaned, but to replace some of the deposit. So they paid no more, but just needed less time to save.

-dave99