Victoria’s change from a first home-buyers grant to a new buildings grant could see an exodus of first-time buyers that similar to that seen in NSW and Queensland.
Photo: Joe Armao
Housing market watchers fear thousands of Victorian first-home buyers could exit the market following changes to government incentives that have propped up demand.
In changes announced this week, first-home buyers who purchase established homes in Victoria will no longer get $7000 in assistance from June 30. Instead, a $10,000 grant will be given to those buying newly built homes in order to stimulate building.
But the experience in NSW and Queensland, where incentives for existing homes have recently been replaced with those geared towards new homes, has been a sharp plunge in first-home buyer numbers.
ABS figures show the number of first-home buyers as a percentage of owner-occupier finance commitments has fallen below 10 per cent – a depth never reached in records that go back to 1992. In Queensland it has also fallen to record lows of about 12 per cent – again, a level never reached.
Newly released figures by RP Data-Rismark show tepid house price growth in April, suggesting prospective home buyers in the near term are unlikely to develop the sense of urgency needed to boost the market. Dwelling values fell by 0.5 per cent over April, following a 2.8 per cent gain in the first three months of 2013, the figures show.
While first-home buyers are particularly hesitant, the entire east coast housing market appears to be nervous. Housing credit is growing at its slowest annual rate in records that date back to 1976, according to March ABS figures released this week, with loans outstanding up only 4.4 per cent compared with a year ago.
In Western Australia, by comparison, first-home buyer numbers have climbed steeply to about 25 per cent of the market.
“Maybe it goes to say the [east coast] market has been supported by those [grants], which in the absence of them would have been considerably weaker,” says Paul Braddick, head of property research at ANZ. He puts the market weakness down to job insecurity and uncertainty about whether the housing market is going up or down. “That urgency to buy just isn’t there,” he says.
Shane Oliver, chief economist at AMP Capital, says he wouldn’t be surprised if Victoria’s first-home buyer numbers plunged in the same way as NSW and Queensland.
“The tweaking of first-home owner grants from existing homes to new homes has, I think, taken its toll,” Oliver says. “That’s why you have seen the numbers fall right off.”
Another reason for the grants’ lack of efficacy is their dwindling value as a proportion of average home prices, he says – it is about 2 per cent of average house prices in Victoria.
“In 2009 you could get up to $30,000 in some states,” Oliver says. “It was typically around 6 or 7 per cent of the average house price.”