Current at: 16 October 2008
HIA, Australia’s largest building association has applauded the pro-active decision of the Federal Government to triple the First Home Owners Grant (FHOG), saying that the measure was necessary to save jobs in the residential construction and manufacturing industry.
HIA Managing Director, Dr Ron Silberberg said that there had been widespread evidence of job shedding by major builders as well as plant closures and retrenchments by building product manufacturers, which were eroding the industry’s supply capacity.
“Thanks to the tripling of FHOG for new housing, major builders have told HIA that they will now curtail further job retrenchments,” he said. Building product manufacturers will be looking to re-open plant and move from a 4-day to 5-day operating week.”
The increase in FHOG has invigorated confidence in the industry and lifted the spirits of many aspiring first home buyers looking at purchasing a new dwelling. Already, builders are reporting an increase in inquiry levels.
“The tripling of FHOG appropriately is targeted at increasing the supply of new housing and will complement other major initiatives to increase the availability of lower-cost new housing. By moving quickly to stabilise the industry’s supply capacity, the initiative will help to ensure the industry is better placed to handle a sustained upswing in general buyer activity down the track, said Ron Silberberg.
A yawning deposit gap has prevented many first home buyers from attaining homeownership. This measure will assist many who due to a lack of deposit and previous increases in interest rates were unable to get into the housing market.
It is ironic that just two weeks ago, some commentators were predicting falls in house prices of 40 to 50 per cent. Following the increase in FHOG some are predicting a house price boom. Neither proposition is credible nor based on empirical research.
Even if the additional FHOG was capitalized fully into house prices (assuming no supply response), the impact on a typical first home of $400,000 would be less than 4 per cent, hardly the impetus for a house price boom.
“It is difficult to see how a nine-month stimulus from the extra FHOG could lead to a break-out of house price inflation. The new FHOG will help to sustain employment in the residential construction industry and provide welcome assistance for many who have been shut out of the housing market,” said Ron Silberberg.