State government initiatives cost the housing market dearly
The naïve, and often cruel, hand of government intervention has shown itself following the raft of state budget initiatives aimed at aiding the property industry.
On June 14 the Queensland Treasurer Andrew Fraser unveiled his $10,000 new home building boost grant.
And the home building industry immediately went dead because its introduction date wasn’t until August 1.
Accordingly Queensland led a national fall in dwelling approvals in June, with an 18.6% fall compared with May.
Urban Development Industry Association Queensland chief executive Brian Stewart says he expects Queensland new home sales to have fallen further in July.
This is flood-devastated Queensland, where the desire for new homes ought be creating record volumes.
Instead there was an immediate restraint shown by Queenslanders.
The Treasurer and his departmental boffins got the desired one-day headlines, but at remarkable cost.
New home approvals in June dropped 18.6% in Queensland, followed by decreases in South Australia of 12.2% and in Tasmania by 8.1%, according to figures released this week by the Australian Bureau of Statistics. There were 1,448 new detached homes approved in Queensland in June, according to the ABS.
Developers claim the mid-June announcement of the $10,000 Building Boost halted sales, threatening not only their cash-flow and also their capacity to embark on new projects.
It's not just the developers caught in the mess.
Builders, architects, estate agents, home ware retailers and so on all caught up in the seven-week-long ripple effect.
There was much exasperation when Property Observer correspondent Andrea Dixon spoke to the Master Builders Association of Queensland chief executive Graham Cuthbert, who says his association members are suffering record liquidations and losses.
“This is astonishing, since 7,000 houses experienced total inundation during the floods and 23,000 sustained water damage,” he says.
Of the 700 quotes the MBAQ prepared for flood-affected housing, only 20 contracts have gone ahead.
Cuthbert believes that the state government flood assistance cap of $80,000 for repairs was too low and people are doing what they can on the cheap and spending the majority of the money elsewhere.
“The government is not insisting the grants go toward a rebuild. People must be taking a holiday with the money, because our members are not getting the work,” Cuthbert says.
Even the fact that the $10,000 boost grant only runs until January 31, 2012 creates distortions and appears far too short a time frame for roll out of such importance.
Ill-considered government meddling with the property markets are nothing new.
NSW property investors will never forget the 2.25% vendors exit tax which last from June 2004 until August 2005.
The vendors tax initiative was potentially a great revenue funding idea – once the freeze on sales ever is defrosted – but it required a national imposition, as one state going it alone cost NSW heavily to this day.
More recently the Keneally government decided it could coax NSW retirees into selling their oversized houses and downsizing to newly built residences, in a two-year plan aimed at boosting the new homes industry in the June 2010 budget.
It ignored the fact that the elderly generally don't like making complicated financial decisions. They don't want to leave their neighbourhoods and certainly not for greenfield developments. It ignored the fact that elderly are wary of off-the-plan, and perhaps even of new homes.
But the over-65s were being offered stamp duty savings up to $22,490 to encourage them to move into newly constructed houses and units, off-the-plan acquisitions, and house-and-land packages.
The senior downsizers will pay zero stamp duty on property purchases up to $600,000.
NSW Treasury expected between 1,000 and 2,000 seniors over 65 to take up the offer annually following its July 1, 2010 start date.
But just 249 retirees had taken up the stamp duty-saving initiative in its initial 10 months.
The scheme was billed as an Australian first by the then premier Kristina Keneally.
The incoming O'Farrell government has extended the scheme to people aged 55 years or older, which ought to increase the numbers marginally.
