Queensland first-home buyer grants targeted at new property miss the mark
The Queensland government appears to have followed the lead of its NSW counterpart by scrapping the existing $7,000 first-home buyer grant and replacing it with a $15,000 grant applicable (only) to new property. While it’s not clear as to whether the policy is intended to stimulate first-home buyer activity or the construction industry it won’t matter either way – the policy will fail on both fronts.
It never ceases to amaze me how governments are fixated with new builds. Liberal, Labor, state, federal – every government’s solution to the construction industry’s belly-aching appears to be to stock up on the latest flavour of government grants that are on special for new property.
Memo to policy writers: If your government wants to introduce a policy with genuine intent to support a targeted audience, pause before you reach for your pen, engage with the targeted audience first and find out what they actually want.
Only a small percentage of first-home buyers actually want to live in mass-produced, high-rise apartments with large body corporate fees. The same goes for a house-and-land package far out in the 'burbs, disconnected from employment nodes, social amenities and recreation facilities. The reality is that’s what you get when buying a new property, and with a significantly higher price tag than established properties in the immediate proximity.
Don’t expect to hear members of the construction industry complain about government grants though. Not yet, anyway. See how they go trying to sell the properties. Then they’ll lobby for the grants to be targeted at investors and / or more NRAS projects. Guess what? We investors don’t want these new properties, either – we see much better investment potential in well-chosen established properties.
According to the REIQ, the $21,000 grants for new property at the height of the GFC only attracted 24% of first-home buyers. Subsequent to that, the former Bligh government’s $17,000 Building Boost for new property also had a poor take-up rate; ditto to numerous other state government initiatives around the country targeted at new properties.
There are approximately 8.4 million residential dwellings in this country; buying one is a big decision. Recognising that buyers don’t want their choices restricted to 1.5% – the 130,000 new homes built each year – should be the starting point for designing good policy. This is not rocket science!
Governments would also do well to understand property cycles before developing policies. A buoyant first-home buyer market is a buoyant economy for everyone. Benefits from increased first-home buyer activity extend far beyond people establishing a footing in their own homes. Increased first-home buyer activity is often the first phase of price growth. Initiatives targeted at encouraging first home buyers causes competition in property markets, encourages investors to become more active, and is a proactive way of releasing this country’s heavy reliance on tax-payer funded pensions.
Increasing property transaction volumes creates jobs in real estate and other service industries, improves retail spending, creates more opportunities for blue-collar tradies in the form of renovation projects, and increases loan volumes for banks. Consumer confidence increases across the board. Governments get a clip of the ticket all the way through via stamp duty revenues, GST receipts, and payroll taxes. The cycle starts with the first-home buyer, not the investor. Policies need to be targeted to encourage first-home buyers, not restricting them!
I agree wholeheartedly that we all need a healthy construction industry, however we should not be fooled in to thinking that the solution is in the form of grants for new homes. This country does not have an over-supply of homes. If we did we would see very few properties for sale, much lower vacancy rates, and banks comfortable with approving more development projects. With a decline in the rate of population growth over recent years maybe the question should be asked “do we have more people seeking employment in the sector than current demand requires?” Or maybe governments need to relax our immigration policy. Now that’s a different debate.
Simon Pressley is a buyers' agent for Queensland-based Propertyology.
