Money for nothing: When government handouts are involved, market gets murky

The State Government stepped in to the housing market with a doubling of its first home owner grants to $30,000. It was either economic foolishness or vital support for 12,000 people entering the market.

Nov 21, 2023, updated Nov 21, 2023
A worker is seen at a new housing building development in Brisbane(AAP Image/Darren England)

A worker is seen at a new housing building development in Brisbane(AAP Image/Darren England)

Economists and the Real Estate Industry Queensland said it will just add to costs and inflate house prices, but Master Builders said it was a win for those trying to enter the market.

The State Government said in the past three years, it had supported more than 24,000 households into their first home through $365 million in grants and that had helped build the rate of home ownership in Queensland increased from 62.2 per cent to 63.5 per cent.

Master Builders said it would help stimulate the market where demand has dropped in recent months.

The extra $15,000 will go towards offsetting increased construction costs due to the Government’s recent changes to the National Construction Code, which was estimated to increase costs by $20,000.

“It will also provide a boost for the building industry over the coming 18 months, where demand for new dwellings has dropped in recent months, with commercial builders busy, but residential builders reporting a slowing of the pipeline,’’ MBQ said.

But economist Gene Tunny said it wasn’t an effective measure.

“There’s a lot of waste because many people who get it don’t need it and would have bought a home anyway,’’ he said.

“And for the marginal first home buyer, it will help them a little bit, but overall critics such as Saul Eslake are right that it contributes to higher overall market demand and property prices.

“The best thing we could do to improve home ownership is to relax restrictions on housing developments including all the counterproductive things like character protection and height and density limits, and we should also cut back on immigration.

“The Federal Government deserves a lot of the blame for our current housing crisis.’’

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REIQ chief operating officer Dean Milton said while the REIQ welcomed the intent to encourage more Queenslanders to achieve home ownership, it would have preferred to see supply tackled head on.

“We’re facing some significant challenges in the real estate and housing sector at the moment that can’t be solved by providing a cash boost to some buyers,” Milton said.

“We’ve seen in recent times, especially in response to COVID-19, an array of new grants at both a federal and state level.  While that’s great in theory from construction perspective, it’s brought forward high demand and put pressure on the cost of building supplies and the ability to access tradespeople.

“We generally support initiatives that give first home buyers a leg up towards home ownership, however at a time when the RBA is doing its best to tame inflation, we question whether now is the right time for more demand side stimulus.

“We know that South East Queensland alone requires in excess of 40,000 houses per annum and incentives on the demand side are unlikely to assist in delivering this target.

“Builders in Queensland are already facing the highest construction costs in the country and we would expect this measure to drive up those costs further.’’

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