Government should consider doubling FHB grants for new build homes only: Daniel Peterson

Government should consider doubling FHB grants for new build homes only: Daniel Peterson
Government should consider doubling FHB grants for new build homes only: Daniel Peterson


The Federal Budget salary sacrifice scheme FHB savings will provide some benefit but needs to be kept in perspective.

The reality is most first home buyers and low to mid income earners earn generally relatively low marginal tax rates. Nonetheless, it does provide an incentive to save for a home deposit, which is great. It provides some structure and discipline which FHBs need.

The ghost house tax scheme doesn't really have an impact on new home builds at all. The quantum of the tax will need to be very substantial to have any real impact.

The reality is the foreign investors engaging in these practices are wealthy Chinese trying to get money out of China into a safe haven. The houses purchased by foreigners are often very high value homes (blue chip areas), so any impact the penalty has will only help renters at the higher end, not first home buyers. It will simply be seen by most foreigners as a tax on getting their money out of China.

It's a shame not more is being done around first home buyer's grants, as it's simple and effective.

The minister is concerned about grants ending up in the pockets of medium density developers and already wealthy home owners, and that's fair enough. Government should consider either doubling FHB grants for new build homes only, or scrap the grant completely for FHB of established, to push demand into new housing.

Reality is when the FHB grant is used in the established property market it only fuels prices and the problem (and gets partly recycled to the states in stamp duty). However, with new builds it creates real jobs and pushes demand away from inner suburbs alleviating constant price pressure.

Another scheme could be to incentivise land developers to sell a certain percentage of projects to FHB's at discounted rates. The incentive could be a lower corp tax rate if the percentage threshold is met each year, encouraging developers to push down prices to FHB's to hit the quota each year.

Government should also be looking at the development of its own land with some projects exclusively dedicated to FHB's, with appropriate pricing set which in turns keeps other developers in the surrounding areas sharp in terms of their own pricing."

Housing affordability has become a significant issue over recent years, driven by exponential growth in median house prices and relatively low levels of wage growth.

While being the most popular cities in which to own a home, Sydney and Melbourne clearly face the most stress when it comes to housing affordability given the lack of new supply to meet growing demand. In addition to this, the growth seen in median housing prices is pushing first home ownership out of reach for many.

First home buyers grants are simple and well understood, whereas new schemes such as access to super or a shared equity scheme are complicated and diminish longer term value and benefits for home buyers.

Creating incentives for first home buyers to buy a new home in outer suburbs or even regional areas (as recently announced by the Victorian state government) are terrific initiatives. Not only do they help get more people into their first home, they also drive demand away from existing properties (mainly in the inner suburbs) which over time will help alleviate pressure on housing prices across the board.

The latest housing affordability report by iBuildNew, the leading online listing site of homebuilders and land developers, reveals the majority (63 percent) of Australian first home buyers (FHBs) believe an affordable house costs less than $450,000, and for 85 percent of FHBs, it means less than $600,000.

The national findings revealed:

  • 63 percent of first home buyers believe an affordable house costs less than $450,000 (median prices in Sydney are $1,152,000, thus 250% disparity)
  • 64 percent of first home buyers are only prepared to look at properties within their suburb of choice or surrounding suburbs
  • 76 percent of first home buyers can't get into the property market because they can't save the deposit or secure a loan
  • Only 22 percent of first home buyers are considering a new home build while 60 per cent are focused on buying an established home or townhouse
  • 55 percent of survey respondents did not think using their superannuation savings would help them secure their first home

Daniel Peterson is a CEO at iBuildNew. He can be contacted here.

First Home Buyers Housing Affordability

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