A leading property advisory group has called on the Federal Government to abolish the first home buyer grant, calling the scheme an “abject failure” as it has grossly distorted the market.
Wakelin Property Advisory said the grant, which has cost taxpayers more than $22 billion over the last 12 years, has meant the number of first home buyers has declined as a proportion of the broader house buying market as prices increased.
The company’s director Monique Wakelin told the Herald Sun that if the scheme were axed, house prices would likely slide $10,000, providing a leg-up for the home buyers it was meant to help.
She said the grants have inflated demand without addressing a shortage in the supply of housing, forcing prices up.
“Unfortunately, the clear evidence is that it has not helped the cause of first-home buyers at all. Rather, it has had the opposite effect,” she said.
State governments in Victoria, NSW and elsewhere have since offered similar grants, compounding the effect. This month, the Victorian Government this month axed its grant for first-time buyers who purchased newly built properties.
Longtime critic of first home buyer style grants, Bank of America Merrill Lynch chief economist Saul Eslake has dubbed it “a complete waste of money” which has grossly distorted the market. Mr Eslake said the policy of artificially inflating demand was “insanity” he had objected to the schemes in different forms for 30 years.
“It is a complete waste of money at best, and it makes the situation for them (first-home buyers) worse,” he said.
Mr Eslake said he doubted governments would dump the schemes because of the impact on owners if the stimulus were removed and prices fell.
“What the Government calls the first-home buyers grant is in effect the second-home vendors grant – because that’s where the money ends up,” he said.
“In a good year, there are only ever 100,000 first-home buyers who would benefit from lower prices. There are seven or eight million existing home owners who benefit from higher house prices,” Mr Eslake said.