20 May 2006

"The Stimulus Package. Breathing life into the residential property market"

The Government has announced the “$688m ‘Home Builder’ Scheme” which will see growth and breathe life back into the ailing property market, stimulate jobs growth, which is good news for the building industry and home buyers and renovators alike however, consumers should look deeper into the conditions of the package before making a hasty decision.

The scheme will fund grants worth $25,000 for home renovations between 4 June and 31 December. To be eligible, single applicants must earn less than $125,000 a year or $200,000 per couple.

New homes valued up to $750,000 will qualify as will renovations between $150,000 and $750,000 that result in the property being worth less than $1.5 million.

The prime minister said the six-month building support program will drive a “tradie-led” recovery, with the aim to build 30,000 homes by Christmas.

“If you’ve been putting off that renovation or new build, the extra $25,000 we’re putting on the table along with record low interest rates means now’s the time to get started,” Morrison said.

The industry has been rife this week with construction stimulus theories—from dollar-for-dollar matching on renovations to a $20,000 payment for any home buyer.

The government has remained quiet on social and affordable housing initiatives.

“We've been looking closely at the residential building sector,” Morrison told 2GB’s Ben Fordham on Tuesday.

“We are more interested in larger projects and new home builds and things like that, because you get towards the end of this year, post about September⁠—where the economists are telling us, the states telling us also⁠—that we are looking at a bit of a drop off in that current home building that's going on.”

On Wednesday, treasurer Josh Frydenberg conceded the country had entered a recession “on the basis of the advice that I have from the Treasury department about where the June quarter is expected to be”.

Will the $25k grant affect home prices

A federal scheme to give homeowners cash grants of $25,000 to build new homes or renovate existing properties will give the real estate market a much-needed boost but will not drive up prices, housing experts say.

The $688 million HomeBuilder program was announced as part of measures to boost the construction industry and will apply to contracts entered between June 4 and December 31.

It is aimed at supporting 140,000 direct jobs and another one million related jobs in the residential construction sector.

Some renovation works such as swimming pools, tennis courts and garages will not be covered by the scheme.

The scheme isn’t not broad enough to drive a major change in prices as there was little support for unit purchases.

This new scheme appears to be better thought out than earlier incarnations of homebuyer grants, which merely inflated prices.

A widened grant for purchasers of new properties would be more effective in reining in housing affordability because it would help increase supply.

Social housing was key to the stimulus package

Money for social housing, not home buyers grants, was the key to construction stimulus.

“Large handouts would prompt some more residential construction by encouraging some people to bring forward their home purchases.”

“But under such schemes, governments also end up giving grants to people who would have bought a home anyway.”

“Even the more pessimistic industry forecasts expect 110,000 homes to be built in Australia next year. Giving $20,000 to all of these home buyers would cost $2.2 billion without adding a single construction job.”

Coates said this would be passed onto house prices and a renovation boost would increase trade prices as research suggested home improvement levels were already above pre-Covid-19 levels.

“The Morrison government should repeat another GFC-era policy, the social housing initiative, under which 19,500 social housing units were built and another 80,000 refurbished over two years, at a cost of $5.2 billion,” Coates said.

“Under the initiative the federal government funded the states to build social housing units directly or contract community housing providers to act as housing developers.

“Because state governments and community housing providers won’t have to worry about finance, marketing and sales, they’ll be able to get to work building homes much quicker than the private sector.

“The boost to the economy would be pretty immediate.”

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