I would have thought Richard Farmer would be more careful than to walk into the fog of spin currently circulating in our nation’s media around the first home buyers grant and not report this spin as fact. No-one with any awareness of the history and beneficiaries of the grant should be surprised that its chief supporters — real estate agents and property developers — are the very people currently promoting the benefits of the increased grant and then seeking that it be extended or made permanent. It’s just a shame that some in the media and many in government are so uncritically reporting and receiving this news as if it’s fact. The reality is that, rather than benefiting first home buyers, the grant is once again benefiting vendors and developers.
All the credible evidence about the grant since its introduction almost a decade ago — be it from bank economists or housing researchers — has consistently demonstrated that the grant has gone straight into higher house prices.
Given that the grant (in its $7,000 form as well as its stimulus-driven $21,000 form for new stock) is not means tested and broadly available, it is hardly surprising that it’s simply allowed vendors to extract more money from first home buyers. And here’s the rub — the vendors benefiting include all the developers and speculators who now have an increased grant to add to their land banks and staged releases.
Investors and real estate agents can now time property sales to ensure that just enough property goes on the market each week, so just enough of it sells, that they can breathlessly report in Monday’s newspapers “property is surviving the boom!” Not to mention the favourite claim (made almost every week of every year) that “now is a great time to get into the market”.
The first home buyers grant has no doubt been given to many first home buyers believing it has provided them with the little bit extra they needed to buy their first home. Yet those people forget that almost every other buyer has just increased their budget by the amount of the grant while investors have their own tax breaks to fund a higher purchase price.
The grant has been used by the already well off children of well off parents for whom the grant has merely added to the amount that their family has been able to give them. It has also been rorted by those buying property in the name of their spouses, or by a range of first-time investors who have used the grant alongside tax breaks to buy into market. Some of this rorting has been found by State revenue offices, but much has undoubtedly gone unreported. At the same time, the real victims of the housing market, low income private renters, have seen property prices artificially inflated by a grant that actually puts their housing dream further out of reach.
The housing market is not a fair and transparent market and the expansion of the grant has only exposed this anew. There is a reason to be concerned that at a time of economic downturn the construction industry is suffering. That is why the investment of over $6 billion into new public and community housing is the right counter cyclical measure (not to mention good, and long overdue, social policy).
The $1.5 billion announced last year in expended first home buyer grants that top up the already poorly targeted $1 billion per annum is the wrong strategy. It is poorly targeted industry assistance for new housing and a complete waste of money when spent on existing housing. It would be more honest to call it a government-funded vendor housing payment. Which of course the Government would if it wasn’t such a politically attractive (though misleadingly) named grant.
If, as a country, we want to support low and middle income earners entering the housing market then we should do so in a targeted way that helps those who need it without boosting house prices for everyone else. If governments want to subsidise builders and developers then they should do so transparently and see how popular it looks then. The media should look more critically at blatant spin from developers, investors and speculators that purports to protect the very people they’re seeking to make money off.
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David Imber is the Policy and Public Affairs Manager of the Victorian Council of Social Service and was formerly the spokesperson for Australians for Affordable Housing.