Home owners grant will cause statewide boost

15 October 2008

Statement by Mr. Chris Atkins, Executive Director, Master Builders Tasmania

The Federal Government’s announcement to increase the First Home Owners Grant to $21,000 for new homes should be applauded, however there are concerns as to the impact the increase of the Grant will have on the affordability of existing homes, according to Master Builders Tasmania, the peak employer body representing the building and construction industry.

Mr Chris Atkins, Executive Director said, “Master Builders Tasmania believes that the tripling of the first home owners grant to $21,000 to construct new homes will create a tremendous boost to the activity in the residential sector with a flow on benefit to the broader Tasmanian economy. The potential down side of the increase to purchase existing homes is that the number of buyers will increase for the limited existing housing stock which may then increase their price.”

Mr. Atkins believes that despite the potential small downside the rest is all on the upside as both increases will result in the building of more new homes, which will have immense retail benefits as the new home owners need new furnishings, appliances and other services to complement their home. Everyone from electrical and furniture retailers to TV antenna installers, landscapers and fencing contractors benefit when a new house is built. It has a major kick on effect.

When the Howard Government introduced the First Home Owners Grant, in 2000 to offset the impact of the GST, it worked extremely well. When the Grant was temporarily increased in 2001 to $14,000 for first home buyers who built a new home, it had a significant positive economic benefit; in fact the housing sector added 0.8 percent to the National GDP at that time. I believe the $21,000 Grant will have as similar impact now, and will be especially beneficial in Tasmania where we have the lowest overall costs to build, primarily due to our lower land costs.”

Mr. Atkins continued, “Based on Australian Bureau of Statistics data, we saw an average increase of around 100 first home owners in the Tasmanian market soon after the introduction of the First Home Owners Grant in 2000. This increase is quite different in that it acknowledges the additional economic benefit that is gained when a new house is built as opposed to the purchase of an existing property, but we still expect an increase close to this amount.”

Mr. Atkins stated, “The really exciting thing about the lifting of the Grant is that it has the biggest impact in Tasmania where we have the lowest loan size out of all States and Territories. The average loan for the construction of a dwelling in Tasmania was $201,000 in August. Given that First Home Owner loans are similar in size to non-First Home Owner loans, the Grant will now pay off more than 10% of the average loan in Tasmania.”

Mr Atkins stated, “The additional $14,000 will make a lot of difference to not only the building and construction sector but also to the overall Tasmanian economy. The economic forecast for a slight fall in dwelling approval numbers will now have to be re-assessed with the likely outcome that approvals will actually increase over last years´ figures as a result of this increase in the First Home Owners Grant.”

Mr Atkins concluded, “Global financial meltdown has been a concern for the non-residential sector of the industry as businesses generally face more restrictions when obtaining finance than residential borrowers do. The State Government’s announcement yesterday that it will provide up to $100 million in finance to small and medium sized businesses where they struggle with lenders is also a welcome signal that it is doing what it can to provide credit to businesses to allow them to grow and consolidate, creating more business certainty to our Members. Both the Federal and State Government initiatives should ensure that the residential and non-residential sectors are insulated from the negative impacts of a building slowdown.”

C. Atkins

Executive Director

For further details contact: Chris Atkins  (03) 6234 3810   Mob. 0438 623 438

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