The only winners out of first-home buyer grants are vendors and developers. Certainly not first home-buyers. The belief that hand-outs make buying easier has no basis in evidence.
In fact, all the evidence shows these schemes are ineffectual in their stated aim. These grants make things tougher for house-buyers of any kind. Census data, aligning with data gathered by banks and academic studies, shows that the percentage of the Australian population that own their own homes has not significantly changed in over 40 years. The housing tenure data from the ABS census data indicates that in 1976, 66% of Australians either owned their own home or were paying off their own home.
Despite multiple incentives, grants and other assistance (totalling billions of dollars), housing tenure figures have remained stable. In 2000, the first of the grants we are familiar with today were introduced to counter the impact of the GST, yet housing tenure figures remained stable. In 1996, 66.4% of Australians either owned or were paying of their own home; post the 2000 home owners grant the 2001 census showed the housing tenure figure remained at 66.2% and in the 2006 census it reached 68.1%. Despite further grants introduced in 2008, under the auspice of post GFC assistance, the 2011 census showed housing tenure stable at 67%.
In addition to being ineffectual in getting more of the population to become home owners, as a direct result of these grants, often housing prices rise rapidly, as the participants in the market have access to greater capital. These hand-outs put upward pressure on housing prices – a certainty explicit in the data, but also on the ground. Our real estate contacts in Geelong are now reporting that buyers are clamouring to purchase their homes before the next hike in grants take effect on 1 July this year. Geelong buyers fear the market impact of these grants – giving some people greater short-term bidding capacity but no financial gain in the long-run.
Commencing on 1 July, a new round of grants is also making things tougher for those of us playing the property game. The goal of any market intervention should be to make the game more equitable for some without ruining it for others. But the billions in hand-outs end up lining the pockets of developers and sellers; not of young people who can’t afford homes. Coupled with increased regulation on mortgage finance, first home-owner grants amount to smoke-and-mirror governing that does nothing to address the problem of housing unaffordability. Instead, populist politicking by the major parties is seeding destructive policy that adversely impacts the livelihoods of most of us.