by Scott Pape - June 17th 2011
“The First Home Buyers Grant (FHBG) has been frozen since 2000. Property prices have doubled since then, so the Government needs to help first home buyers and increase the grant.”
So said a press release from mortgage broker Mr Dean Rushton, CEO of Loan Market.
This week I got him on the talkback line for an interview:
Barefoot: “Why should taxpayers put their hand in their pockets to push more people into an overvalued property market?”
Broker: “Because the market needs new entrants.”
Barefoot: “But haven’t we learned from the US that encouraging people who don’t have adequate savings to buy homes is a dumb idea?”
Broker: “Yes, but we need to maintain a healthy market.”
It was a lively interview that proceeded to produce a full board of angry callers (if you’d like to hear it click here).
With nearly twice as many unsold homes sitting on the market now than about a year ago, a stimulus wand needs to be waived to prop up the market – well, according to him anyway.
But as a social policy stimulating the first home-buyer market has been a disaster with nearly one in two first home buyers who are in some form of mortgage stress.
The Three Talkback Callers
The Press Release Pusher
“We should increase the grant to help struggling first home buyers.”
The Ruthless Numbers Guy
“These people are idiots – they deserve to lose their homes.”
Girl Power
“Property doubles every 7 to 10 years.”
I really enjoyed my time on talkback this week. The listeners were smart, good hearted, everyday types of people. Ironically, the only problem calls I had on a radio show devoted to talking about money turned out to be the callers who were licensed professional advisors.
Tread Your Own Path!
Photo: http://www.flickr.com/photos/swamibu/2868288357/
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8 comments
The property market is in its death throws and things are looking very bad. The irresponsible GFC stimulus simply kicked the can down the road and now the crash will be twice as bad. I expect to see prices down 30-40% within a couple of years. Auction results across Sydney and Melbourne have collapsed (see australianpropertyforum.com/topic/8694847 for details) and stock is building up on the market at a rapid rate. Unless vendors drop prices to meet the market, their homes won’t sell. Simple as that. For the real estate speculators, the party is well and truly over.
Peter J
If a market needs propping up by new entrants I would not describe it as healthy. A healthy market sustains itself with existing customers.
I agree with Jane, why don’t they eliminate all subsides.
If you can’t afford something buy yourself why get tax/government kickbacks.
I just dont get it. This article says “With nearly twice as many unsold homes sitting on the market now than about a year ago,” but another related article (with Niel Jenman et al) suggests that theres a bigger demand than supply of houses. The 2 comments are in direct contradiction to one another surely? or am I missing something here?
Having not read the article with Neil Jenman et al I would just like to point out that those two statements you mention do not necessarily contradict each other.
There is quite a number of conceivable explanations for this situation e.g.
i) The pure economic argument – the sellers don’t want to meet the buyers expectations on price or vice versa i.e. neither party is willing to come to an agreement on price thus we are left with a build up of unsold homes and a build up of unmet buyers in the marketplace. This scenario is quite common initially in a slowing or falling market where buyers hold off in the hope of a price drop and sellers stand fast in the hope of attaining what was previously an achievable price.
ii) The buyers and sellers are concentrated in different markets – the Australian property market is in fact made up of many thousands of smaller property markets based on price, state, city, suburb and property type. Each of these smaller property markets is linked by the Australian economy and the overall prevailing macroeconomic conditions. It is therefore possible that there is a build up of unsold Australian houses from sellers but at the same time the build-up in demand from buyers is for high density units or town houses. Similarly sellers could be faced with a build up of unsold houses in country areas but buyers faced with a shortage of houses available to purchase in city areas or vice versa.
This is just a few possible explanations
Great work Scott. Keep on pressing this issue. The first home owners grant is a scam to pass wealth on to the older generations. A healthy market doesn’t need propping up (just like jane mentioend). I loved listening to your interview – you smashed him and it was the right thing to do. Great work!
Real estate agents use the first home owner’s grant against you when you try to buy a place. I’m pretty sure they add several grand to the asking price for new buyers so the benefits of any increases would be almost negligible.
It totally agree Scott, the Government is just fueling the fire handing out money to keep house prices rising just preventing the inevitable.