IT'S time to scrap the first home owners' grants. Yes, I know all those young couples are desperate for a home … but the grants don't help. In fact, the grants have the wrong name: they should have been given a name that more accurately reflects what's been happening — they might have been called the "tradies' top-ups".
Since Kevin Rudd jumped in last year with the first home buyers' "boost", the part of the market where prices have risen significantly is — believe it or not — the first home buyer sector.
It's the complete opposite of what was meant to happen. There's a recession on: unemployment is rising and lower-end house prices should be falling.
Most first home buyers don't buy houses in new housing estates, they buy from existing stock. Traditionally about 85 per cent of all first home buyers buy old houses — that's data from the Housing Industry Association (HIA).
So most of the money being pumped into first home buyers' grants is only any good for 15 per cent of the home buyers out looking for a property. But it helps 100 per cent of the home builders who work in the area.
Harley Dale, the chief economist of the HIA, confirms there is already anecdotal evidence that home prices are going up for those first home buyers who go for older houses. Dale says price rises of about $20,000 are evident in some cities.
He also says there is no evidence yet prices are going up in the new estates. But as Mandy Rice-Davies once told the judge in the Profumo scandal: "He would say that, wouldn't he." Dale — who works for a group that represents builders — concedes you can't have old and new homes going in different price directions for very long.
Worse still, since the Government put a deadline on the expanded home buyer grant scheme of June 30, first home buyers are now falling over each other to beat the rush. (It used to be $7000 for new and old houses — at the moment it is $21,000 for new houses and $14,000 for old houses.)
The objective is surely to make buying a home easier for more people; that is, to improve affordability. Figures from Commonwealth Bank show that affordability improved by 20 per cent in the three months to Christmas but it may not get much better in the three months to March after house price data last week showed prices across the board holding up better than most expected.
Ultimately affordability is underpinned by falling interest rates. And there is every chance rates will fall further — from an official rate of 3 per cent now to say 2 per cent — in the months ahead.
If you want a true measure of affordability, then home loan rates at their lowest for 50 years should be all you need to know. Now property investment consultants are telling investors to stay away from the bottom end of the market … because it's overheating!
Indeed, property advisers are recommending home buyers move upmarket where the real bargains can be found.
And though the HIA or property agents don't suggest it, the place to start looking for the million-dollar bargains may be in the sports pages, not the property pages.
Tennis star Lleyton Hewitt is the latest sporting casualty at the top end with his Adelaide mansion on the market for $2.9 million. That's $300,000 less than he paid for it six years ago. Footy stars pop up every other day with tales of wanton property speculation followed by puzzled regret.
Of course the discounted pads of sports stars are no good to most of us, especially first home buyers. Kevin Rudd is expected to deal with the new home grants in the federal budget on May 12. He might as well scrap the expanded grants package and phase out the idea entirely.
The grants have been a distortion that backfired. If he wants to compensate the building industry with a new version of the "tradies' top-up", he might as well call it by the right name.
kirbyjourno@hotmail.com