State governments need to look at first-home buyer handouts: Mortgage Choice

Mortgage Choice CEO Michael Russell says he is certain state governments are re-assessing their first-home buyer grant schemes following dramatic falls in their share of the mortgage market.

Russell quoted ABS figures showing that from July to December, the proportion of first-home buyers taking out home loans fell from 18.6% to 14.2%.

A year ago (December 2011) their share of the market 20.2%.

Russell told Property Observer this was a "significant deterioration" and an area of "genuine concern.

He says changes to first-home owner grant schemes are not having a "particularly favourable effect".

Last year the Queensland and NSW governments withdrew the $7,000 first-home owner grant and replaced it with a $15,000 grant but only for those who buy or build a new home.

Russell says Mortgage Choice believes that all first-home buyers should be entitled to the first-home buyer grant.

"The notion of not indexing it it does not make sense.

"It needs to be indexed.

"I am sure it is being assessed at the moment, there will need to be action," says Russell.

He added that he does not subscribe to the notion that the grant has an inflationary effect - the theory that the grant pushes up house prices so first-home buyer don't actually get any benefit.

In his presentation to media following strong interim results, Russell noted that there had also been a declining in those refinancing, despite "incredibly attractive competitive interest rate and removal of exit fees" with the percentage of mortgage holders refinancing falling from 19.3% to 17.7%.

The good news for the market, he said was a rise in the number of homeowners looking to upgrade, with loans from this sector rising from 35 to 38.5% and the return of investors coming with their share of the market rising in both percentage of loans  and value, up from 31.4% to 33%.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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