End of increased first home owners grant set to hit the property market

The property market will be hit in the next few weeks as the increased first home owners grant will be shrunk before its phasing out after 31 December.

Real Estate Institute of Australia president David Airey says that while the diminishing of the grant will not be much of a problem in the short-term, it could give the industry some problems later on.

“The first home buyers’ market has been well prepared for this, and the grant itself has proved to be very successful which will ensure there’s not much of an impact in the short-term.”

“But I think in the longer term this is likely to be an issue. As prices increase, the diminished grant of just $7,000 will be a very small one for people starting off with a new home. We’re working with the Government to see it increased, because purely on an index basis it should be higher after it was introduced in 2000.”

Australian Property Monitors economist Matthew Bell says while the market will continue to hold up well overall, there will be immediate effects in the number of properties put up for auction.

“I think we will see some immediate effect in terms of a fall in demand and numbers, and that’s simply because a lot of people have brought forward a purchasing decision,” he says.

“However, I don’t think we will see a huge effect across the board in terms of prices. If I had to guess about the price effect about first home buyer markets, it’s going to see more of a plateau than a drop.”

Bell says that as the first home owner’s grant prepares to drop in size after 30 September, the market will benefit from its effects after it disappears.

“This grant has been spectacularly successful in terms of a how it has shored up prices and helped activity in related industries, specifically construction which has seen a real boost.”

In auction results, Melbourne has continued its streak of good results, with the city’s clearance rate above 80% for a 19th consecutive weekend.

Additionally, the city has recorded the highest number of auctions since 25 October 2008 when 942 houses were put up for sale. This weekend 821 auctions were reported, with 528 sold resulting in a clearance rate of 82% with total sales reaching $471 million.

In Sydney, a total of 245 properties went on the market with 192 sold resulting in a clearance rate of 76%. Total sales reached $140 million.

In Brisbane, 19 properties sold out of 42 on the market, with total sales reaching $7.3 million, while in Adelaide only 14 properties sold out of 28 on the market, with total sales reaching $7.4 million.