Wayne Swan set to assist NSW and Queensland push towards 'builders' first-home owner grants

The federal government appears happy to allow the state governments of NSW and Queensland to break their commitment to offer “universal” first-home owner grants following the two states' decisions earlier this year to only incentivise new home purchases.

Since September 12 in Queensland and October 1 in NSW, first-home owners qualify for a $15,000 state government handout if they buy or build a new home.

First-home buyers who purchase an existing home receive nothing.

These decisions, aimed at stimulating the residential construction sector, are in clear contravention of state government commitments to provide a “universal” first home owner schemes (FHOS) to all buyers".

This looks set to change with the GST Distribution Review Final Report released at the end of November recommending that the states be relieved of their obligation to offer a universal FHOS grant.

“It should become a matter for States’ own policy decisions as to what financial assistance should be offered for new home buyers,” says recommendation 11.4.

It is now up to federal treasurer Wayne Swan to make consult with the states before making his final decision.

However, the states have not had any kind of reprimand, despite offering an incentive that has been called nothing more than a “builders incentive” and flying in the face of logic, given that a higher proportion of first-home buyers wish to buy an existing home than a new home.

This iss borne out in the latest Mortgage Choice consumer survey, which found that more than 47% of first-home buyers looking to purchase in the next two years are looking to buy an existing property with less than a quarter (22%) considering building or buying a new – the remainder are undecided.

In response to a number of questions from Property Observer a spokesperson for the Federal Treasurer’s office said that “regrettably” there was not much that could be said.

Property Observer had asked what is the Treasury’s position was on NSW and Queensland breaching their obligations by adopting these new grant arrangements and whether the Treasury accepted the view that these have become “builders grants” not a first-home buyers grant?

Instead, Property Observer was directed to the following paragraph in the media release issued following the release of the GST Distribution Review Final Report.

“I look forward to discussing the Panel's recommendations with State and Territory Treasurers at the Standing Council on Federal Financial Relations meeting on 17 December 2012, prior to announcing the Commonwealth's position once the Government has given thorough consideration to the complex issues addressed by the Report,” said Wayne Swan.

Speaking to Property Observer in November, Ray White chairman Brian White said the new grants were distorting the market “and not in a healthy way".

“It’s no longer a first-home buyer’s grant but a builder’s incentive,” said White who labelled it deceitful to describe it as a first-home buyer’s grant.

His comments follows the Real Estate Institute of Australia (REIA) voicing concern at the decisions by the NSW and Queensland governments as well as plans by South Australian government to end its $7,000 universal first-home owner grant in June 2014.

"Not only is this in breach of the InterGovernmental Agreement (IGA) but it ignores the evidence that 70% of first-home buyers have a clear preference for established houses,” said REIA president Pamela Bennett.

“The IGA clearly states that assistance to first-home buyers will be uniform and that an eligible home will be new or established.

Bennett also claimed that first home buyers of established homes “often embark on a program of home-improvement and renovation, which helps stimulate the building sector”.

WA, Victoria, Tasmania, the ACT and the Northern Territory continue to offer a universal $7,000 first-home owner grant.