Federal Opposition housing spokesman Scott Morrison has urged the Government to extend its increase to the First Home Owners Grant (FHOG).

Last year the Government doubled the grant for people buying their first home from $7,000 to $14,000 and tripled it to $21,000 for those buying newly-constructed homes. The extra grants are due to expire at the end of June.

Mr Morrison says the Government has the money to extend the increases."We do think the money should come from the social housing program - more than $6 billion that will simply not be spent in the timeframe the Government has provided for," he said. "So there is money there to enable the First Home Owners Grant and to end the confusion and end the delay."

But Prime Minister Kevin Rudd has again made it clear the boost to the grant is unlikely to be extended. He says it has served its purpose."[It's purpose was to] give a helping hand on the way through, add to confidence in the economy and on top of that boost jobs for our tradies," he said. "As I said, we've been very clear in our announcements about how long this program would last and, as I said before, all good things do come to an end."

Earlier the Master Builders Association (MBA) predicted there would be substantial job losses in Western Australia's economy if the boost was axed.

Last-minute rush

Developers are bracing for a rush of last-minute applications, but builders and banks are worried the buying will dry up after the June 30 end date.

Mortgage and Finance Association of Australia CEO Phil Naylor argues the property sector still needs to be propped up. "We think there is a good reason to extend it for a further period. Anyhow, we've never suggested there should it a permanent feature in the environment but because we're looking at trying to stimulate the economy, we think it's been a good move," he said. "Even if only the Government continued that part of the grant that related to new commencements. That in itself would be a welcome stimulus."

But some economists disagree. BIS Shrapnel senior economist Jason Anderson says first home buyers are flooding the market for other reasons, mainly low interest rates and cheaper houses. "We've got extremely attractive housing rates so part of the motivation for first home buyers is the relief that's coming through in interest rates and the boost has clearly created an extra impetus behind that," he said. "I think if we look at previous cycles, when we've had very substantial rate cuts, you're first home buyers numbers have tended to recover, but over a 12-month period, and clearly the rate of improvement that we've had in the last six months in particular, has been amplified by the boost scheme."

He says people wanted to get into the market before the grant boost expires should not rush in to a mortgage blindly. "I don't think that people should be acting in a fashion where they're not sitting down and doing their numbers properly," he said."It's always the best thing to work out what you think you can afford with higher interest rates in where we are today."

First home owner boost 'should continue' - ABC News (Australian Broadcasting Corporation)

First Home Loan Specialists Comment

The argument continues. The Prime Minister has now placed the Government firmly in the middle of the argument. They can now end the First Home Owners Grant boost and take the "I told you so" position or leave the boost in place and take "We are generous" position. It has been reported today that the Victorian Government will scrap all their First Home Owners assistance on established and it will apply only for new dwellings.

It may be that the Federal Government will follow suit. All will be revealed in the May budget.

Greg Brierley
Principal
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