First Home Owners Boost Scheme - panacea or placebo?

Marketing of the upgrade was well orchestrated and due to there being a large proportion of the Central Coast that falls into the value range which is affordable to first home buyers, the effect of the increased grant was almost immediate. Those struggling to save a deposit found themselves in a position of being able to afford their first home and similarly, those who were forced to pay rents which in many cases were nearly equal to mortgage payments also found it possible to buy their own home – courtesy of the grant boost.

The first buyers market is considered to be sub-$300,000 to $350,000 on the Central Coast, and during the first part of this year sales activity in this segment was very busy indeed. The Central Coast office of property valuers Herron Todd White has estimated that just over 65% of the mortgage valuations they have carried out this year has been within the first home buyers market.

“This is a worrying sign as there is too much concentration in the first home buyers market without a corresponding move in other market segments and the property investment market,” said Central Coast Manager, Syd Triggs. “In a stable or balanced market, it is reasonable to expect that as lower end property sells, an owner will generally upgrade to a “better” home with the next seller doing likewise and the overall activity is spread across a number of market segments, including the investment market. However, at the moment there is a disproportion of activity between the first home buyer and the other market segments, which are still subdued,” he said.

The First Home Buyers Boost Scheme is to be phased out by the end of the year. In the scramble to purchase in this market segment, and in response to this demand, a slight increase in lower end property values has been noticed, but there has also been an increase in the average size of home loans.

More noticeable though, is that most of the activity has been in the established home market with the new home market getting little attention. Mr Triggs said, “This is most likely a local problem though, attributable to the limited vacant land stock available on the Central Coast compared to other regions, like the Hunter where vacant land is plentiful with lower purchase costs.”

With this type of evidence, and looking at the state of the economy generally, Herron Todd White considers the boost can only be viewed as a short term solution to a larger problem. “It seems that an artificial and unsustainable market has been created by the First Home Buyers Boost Scheme and we are likely see a return to the market that existed just prior to the introduction of the boost. This, as we know saw long marketing periods and a number of mortgagee sales,” said Mr Triggs.

“The first home buyers market is a small part of the Australian economy, albeit a very important part. But like any other ailing part of the economy, an isolated change (or in this case a stimulus), will not necessarily lead to an overall improvement in all areas.”

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