First home buyers grants capitalised in the price of land

The first home owners grant and bonus schemes are inflating prices and distorting markets in Melbourne's suburbs where new home owners receive an above average share of the subsidy. The State Revenue Office paid out $434 million in grants in Victoria in 2004/05 and $446 million in 2005/06 for both the $7,000 first home owners grant and the $3,000 first home owners bonus. Buyers in urban fringe suburbs such as Craigieburn and Cranbourne saw house prices increase by more than twice the Melbourne average. In Craigieburn, median prices jumped 13.2 per cent over those two years, and in Cranbourne by 9.5 per cent.

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