First home-buyers desert new home market
The first home owners' grant has exhausted demand for new homes and created a large oversupply, according to Master Builders Australia and BIS Shrapnel. Between March 9 and December 31 last year, 48,151 people received the first home buyers' grant of $14,000 for new dwellings. But a lot fewer people applied for the $10,000 grant which replaced it on January 1 this year – only 4,047.
Industry experts say that the $14,000 grant brought forward intentions to buy new homes rather than creating new demand. BIS Shrapnel's Robert Telford claims the grant has resulted in a huge oversupply which may take seven years to correct, particularly in smaller states such as South Australia and Tasmania, and in Queensland. The doubling of the grant last year made a big impact on dwelling commencements, which soared 55 per cent in Queensland and 74 per cent in Tasmania.
Macquarie Bank chief economist Richard Gibbs said that high rental vacancies in some capital cities had been created by the $14,000 grant. It made owner-occupiers out of many renters within 18 months, people who wouldn't normally have made the move in that time-frame. It will probably take about three years for the pool of first home-buyers to replenish fully, he said.