Changes to the Australian Government’s First Home Loan Deposit Scheme that allocate 10,000 new grants only to those who purchase new or newly-built homes ignore the reality of the market, according to the Real Estate Institute of Australia (REIA).
“Historically we have seen that less than 20 per cent of Australian first home buyers buy new homes,” REIA President, Adrian Kelly, said.
“Over 80 per cent of Australian first home buyers purchase established dwellings.
“In more recent times even fewer small home buyers are choosing new dwellings.
“In general, first home buyers’ property choices are based on affordability of older dwellings in locations that provide proximity to work, leisure activities and infrastructure including public transport.”
The scheme, while intended as a shot in the arm for the building sector, ignores the fact that sellers of older homes to potential first-home buyers are likely to then build their own home – creating jobs for the building sector regardless.
“The multiplier and employment effects are probably greater than when a first home buyer purchases a new house, as the size and cost of construction of dwellings purchased by upgraders is generally more than that of first home buyers,” Mr Kelly explained.
“First home buyers in lower value established homes also usually embark on a program of home improvement and renovation providing a stimulus to the building sector.”
REIA stress they are a long-term supporter of the First Home Loan Deposit Scheme and have called for the program to be expanded.
“Three-quarters of Australian first home buyers have less than a 20 per cent deposit and incur mortgage insurance,” Mr Kelly said.
“As property professionals that work with home buyers every day, REIA advocates for the extension to be applied to all first home buyers and not discriminate between buyers of new or established housing.
“It would have been far better to not limit the additional places to new builds in terms of the economic impacts and first home buyer preferences.”
HIA and MBA back the changes
Despite the REIA’s reservations, there is no doubt that the scheme will create jobs and stimulate the building sector.
“Changes to the Australian Government’s First Home Loan Deposit Scheme, applying exclusively to those purchasing a new home or apartment, will support jobs in the residential building industry,” Housing Industry Association (HIA) managing director, Graham Wolfe said.
“The fact that demand from first home buyers is so great that the government has decided to expand the scheme, shows what HIA’s research has suggested all along – Australians still cling to the dream of home ownership and the security it brings.”
Denita Wawn, CEO of Master Builders Australia said the scheme is a proven success story.
“Expanding it for new homes ticks all the right boxes to help us build our way to economic recovery,” she noted.
“Thousands of small builders and tradies are staring down the barrel of destruction. This move by the government is going to help save jobs and keep businesses afloat.
“Boosting home ownership and residential building activity are among the most effective ways to fire up aggregate demand, which is exactly what we need right now.”
Ms Wawn calls helping people overcome the deposit gap “the single most effective way of building financial security, which is fundamental to people’s mental and physical wellbeing”, stating this expansion can “help the country build its way out of recession”.
“Home building has the second largest multiplier effect in the economy through its supply chain,” Ms Wawn added.
“The building industry is deeply integrated into the economic fabric of this country, more building means more growth and more jobs.”