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The Forum > Article Comments > Billions of dollars wasted on grants to first home buyers > Comments

Billions of dollars wasted on grants to first home buyers : Comments

By Saul Eslake, published 17/3/2011

Has any government policy than the first home buyers grant been pursued for so long by so many for so few results?

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The grant raised the price of houses by the value of the grant and thereby cost the purchaser the same amount. It was a First Home Vendors grant as Steven Keen puts it. The money went to the vendors.
Posted by Atman, Thursday, 17 March 2011 1:31:49 PM

Atman, you are correct, and may I say, it was the Real Estates and Real Estate Institute in each State that capitalised on the last First Home Owners Grant directly caused by the Labor Government who gave little notice to people who had just sold their homes, seeking another home, most of which were put on the market for another $30,000-50,000. Greedy sneaky real estates, some of whom, did not inform vendors who had just put their homes on the market, that they could sell for more either. It affected vendors too that had only just placed their homes on the market a week or two before it was advertised. I believe the Real Estate Institute through Business and Commerce alliances would have known earlier about the forthcoming First Home Owners Grant to be kicked off again.

Homes that were worth $320,000 were marketed for another $30,000, loans sought by thousands of first home owners were denied, in part because they missed out as a result of bank queues with staff being unable to process the loans prior to the cut off dates specified by Government, it caused first home owners to purchase homes well out of their reach by up to $50,000,later finding themselves in trouble financially, adding all of the problems Saul has mentioned.

Few grants were given out in my state, seriously disappointing many first home buyers.
Posted by weareunique, Thursday, 17 March 2011 10:31:34 PM
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As I pointed out in a recent post in the general forum (I would never stoop to saying 'I told you so...'), rather than giving out tax payers money to inflate housing prices, why not offer low fixed interest loans to first home buyers, capped at a reasonable amount, (say $200k.)
It would then be a 'chicken or egg' question, of whether the loan interest matched inflation, or inflation matched loan interest.
Instead of money gone, the loan fund could be self funding, and cost tax payers nothing.
Yes, it would reduce the price of existing houses, but that's due to happen anyway, and let's face it; the only way to profit from rising house prices is to ride the wave, and keep moving outwards.
It's way past time we stopped living beyond our means, and expecting our children and grandchildren to pay for our excesses.
And of course our free market banks, who love competition, would be more than welcome to compete against the gommint's low fixed interest loan package...
Posted by Grim, Friday, 18 March 2011 7:57:57 AM
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Your concept is the wisest Grim!
Posted by weareunique, Friday, 18 March 2011 8:46:36 PM
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GY>>... but I remember being convinced somewhere around 83/84.

Yes, but back then it was the 'home savers grant', a very different grant to the $14K 'hand out' grant first introduced by Howard around 2000/01.

I Myself have long been opposed to any form of 'hand out' as it simply does little for the community at large and, once 'granted', it is gone.

My suggested remedy is for a home owners 'loan'.

These loans of up to $50K should be given to those who qualify in order to establish themselves as 'home owners', they should be on an 'interest free' basis, perhaps with a 'use by date' and they should have conditions such as, The home owner can never borrow against the equity in their home until this interest free loan is repaid.

This would help prevent the over borrowing on equity for cars, boats and holidays.

Now the net effect is the similar, it helps people enter the market, however, the 'grant' remains the property of the 'tax payer' and can be used again and again to help many, not just 'one'.
Posted by rehctub, Saturday, 19 March 2011 6:10:18 AM
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Excellent Rehctub, both yours and Grim's viewpoints are sound.
Posted by weareunique, Saturday, 19 March 2011 7:54:32 PM
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The grant did in fact raise the price of houses, but indirectly in many cases.

What the grant did was allowed for more borrowers to enter the market, who, pre grant, were unable to obtain finance.

Of cause, more qualified buyers, resulted in increased demand and ultimately, increased house prices.

Where the grant went wrong was like this.

A house in the northern outskirts of Brisbane sold for about $250K.(2001)

The grant, $14K, represented the total equity in the property in most cases and, despite many claiming to be 'property gurus' the housing market boomed through nothing other than plain old luck for these folk.

Continued.
Posted by rehctub, Sunday, 20 March 2011 6:51:49 AM
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