Don’t Stop The Dance: First-home grant to end

I know, I’m retired, but I could not resist this one.

I can see why the “Rudd Government is resisting requests to extend its highly successful increase in the first-home buyer’s grant, raising fears of a housing slump once the scheme is terminated on June 30.”  Not my words

First-home grant to end

For Domenico Monardo, 21, and his girlfriend, Carla Hirigoyen, 20, the $21,000 in federal and $3000 in NSW government grants they received was a big incentive to build a new house rather than purchase an established one. The couple recently paid $305,000 for a 594sqm block of land at The Ponds, a new Landcom development near Kellyville in Sydney’s northwest.

They will borrow a further $240,000 to build their dream home.

Extending the first-home owner’s grant has split the housing industry, with the Housing Industry Association backing the Government’s view that the scheme should end as scheduled on June 30, while the Master Builders Association wants it extended to the end of the year.

New housing finance figures released yesterday show the stimulus, which doubled the first-home buyer’s grant to $14,000 for people buying established homes and trebled it to $21,000 for people buying new homes, has had a dramatic effect on demand.

The number of first-home buyers has risen from a low of 8818 in August to 12,500 in January, traditionally a quiet month in property markets.

The 6657 loans for new houses in January was 16.9 per cent ahead of the level in September, before the increase in grants for first home buyers was announced.

Insane?  Have Domenico Monardo, 21, and his girlfriend, Carla Hirigoyen, 20, done their  maths?  Check out their ages.  HUGE COMMITMENT!

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43 Responses

  1. On the positive side ‘they should enjoy their dream while it lasts’.

  2. Rather than encouraging young couples into large debts perhaps it’s time the government stopped ignoring this country’s housing shortages for lower socio-economic groups, without over-inflating existing housing prices and rents. It all comes back to affordability across the board.

    Housing shortage will hurt the poor
    http://www.theaustralian.news.com.au/story/0,25197,25174266-601,00.html
    The Government has justified the temporary boost to the grant as a measure to bring forward purchases in the face of economic crisis.

    But the council’s report highlighted the country’s long-term housing shortage, the burden of which would fall predominantly on poor families.

    Owen Donald, the chairman of the council, said a lack of land on urban fringes of cities did not appear to be driving the shortage, contrary to industry claims.

    Instead, Dr Donald said, state governments had failed to provide enough social housing. They had also contributed to prolonged planning and development approval constraints on “infill” land in built-up areas.

    New research prepared for the report showed a lack of affordable housing for low-income renters. These renters need 237,000 dwellings, the research found.

    But across the country there are only 91,000 affordable houses or apartments. Of these, higher-income households occupied 56,000, leaving a shortage of 202,000 affordable houses and apartments.

    The Minister for Housing, Tanya Plibersek, said the report showed that government and industry responses could begin to close the gap between housing demand and housing supply.

    “Certainly, the argument that the previous federal government mounted that it was all the states’ faults and it was all about land supply, I think is disproved by this report.”

    Dr Donald said the worst-case scenario of a 1.5 million shortage in houses was unlikely to eventuate, as the Government and industry responded to the problem.

  3. John, how would you suggest to tackle housing affordability?

  4. Min

    I suggest the federal and state governments put their heads together and start cracking. It will need very careful planning and financing.

    I would certainly try to avoid the development of public housing estates given they’re failed so miserably in the past. Combination of public and private with the aim for these developments to self-fund.

    I’m not an expert in this area but I know a major problem when I see it.

    What about you MIn, any suggestions?

  5. Min

    I can’t imagine taking out such a hefty loan like the couple mentioned in good time let alone in times like these. They both have to work full-time no doubt in order to keep meeting mortgage repayments.

    Unemployment hits 5.2%
    http://business.smh.com.au/business/unemployment-hits-52-20090312-8vto.html
    Australia’s unemployment rate has hit 5.2% – the worst it has been in four years and further proof the economic downturn is getting worse.

    Data released today by the Australian Bureau of Statistics show that in February, 53,800 positions were lopped out of the economy but 55,600 part-time positions were created, leaving a net increase of 1800, seasonally adjusted.

    Economists surveyed by Bloomberg had tipped 20,000 positions would be wiped out.

  6. …very slim to no margin of safety I’d imagine if either loses their jobs, or are reduced to part-time work, interest rates go up in order to combat inflation etc.

  7. And then there’s this stuff to consider with the mortgage:

    http://www.smh.com.au/national/new-blow-to-household-bills-electricity-up-20090312-8vob.html

    50 houses a day [in NSW] have electricity cut off

    http://www.smh.com.au/text/articles/2009/03/10/1236447215323.html

    I don’t have a clue to answers on the housing crisis but surely the record migrant intake and negative gearing are two factors in the high price/shortage of homes both for buying and renting.

  8. Sans Blog

    “I don’t have a clue to answers on the housing crisis but surely the record migrant intake and negative gearing are two factors in the high price/shortage of homes both for buying and renting.”

    Very relevant points Sans – immigration intake/population growth has to be monitored and managed much more carefully for sure. And all this negative gearing was bound to have consequences.

  9. What about you MIn, any suggestions?

    John..you’re going to be sorrrryyy…

    Heaps of ’em.

    For starters, there is no such thing as ‘affordable housing’ even though developers put this before council as such. As per your quote, having to take out a $240g loan is not affordable.

    You cannot get much cheaper nor go further away from where your job is located.

    A suggestion has been: releasing more land for urban development. Such as where? In the major urban centers very little is left except for a few in-fills. An example is Dandenong Ranges foothills, this has major issues re landslip or Byron Bay, no industry except for tourism and major problems with acid sulphate soils.

    Therefore a solution could be major investment (jobs) in the languishing regional centres with existing infrastructure, eg Shepparton, Warrnambool (being originally from Victoria, these are ones that I can think of).

    The reason that some housing is expensive is: a salubrious environment And/Or close to where one works. Therefore, relocate jobs (yes I know, not easy with the 1st jobs to go during a Recession being in regional areas).

    I agree with Sans, immediately stop the encouragement for developers to build ‘expensive’. End negative gearing, end the 1st home buyers grant or better would be, means test it and place a limit on the worth of the home equals downward pressure on prices as builders seek to cater to the 1st home buyers market.

    Public housing provides competition and encourages lower prices. However public housing should not stand out like you-know-whats. For every major subdivision at least 5% should be mandatory public housing and scattered thoughout the estate.

    John re: “very slim to no margin of safety I’d imagine if either loses their jobs, or are reduced to part-time work, interest rates go up in order to combat inflation etc”

    But also, where will these people be if they are just renting. Two week’s notice and then out on the street.

  10. Min

    I knew you had ideas just waiting (lol). Really top notch feedback Min, very well considered. I’m not sorry.

  11. Min

    And the solutions = major projects and government spending at both state and federal levels. Can’t really be avoided though.

    I know NSW is a money pit simply because the government are complete incompetents, which would be a major obstacle and expense. Consider the waste.

    They’ve grossly mismanaged state finances over the last decade not to mention health, transport, education etc, and they’ve got the gall the hire more spin doctors to try and create the illusion that they’re competent and in control.

    $1m extra a year for advice
    http://www.smh.com.au/national/1m-extra-a-year-for-advice-20090307-8rvs.html
    THE Premier Nathan Rees’s mega-ministry is costing $26 million a year, with the wages bill for political advisers and spin doctors increasing by $1 million a year under his stewardship.

    Despite his pledge to cut the number of advisers working in ministerial offices, Mr Rees presides over a gargantuan government where staff numbers have blown out to 239.

    Royal North Shore Hospital’s $1 billion bungle
    http://www.news.com.au/dailytelegraph/story/0,22049,25169144-5006009,00.html
    STATE Labor’s $1 billion RNS Hospital project is in a shambles with the discovery that its operating theatres are too small for major operations.

    Derailed: no power for new carriages
    http://www.smh.com.au/national/derailed-no-power-for-new-carriages-20090309-8tc5.html
    THE CityRail network has insufficient electric power to run the biggest order of new trains in Australia and has been forced to spend more than $1 billion to fix the problem and to pay for other essential upgrades.

  12. John..I plead guilty to having been a Shire Councilor (the now defunct Lilydale Shire, now included in Yarra Ranges Shire).

    I just become very cynical when I see quick fixes such as releasing more land or cutting back on developer contributions (well that one works a treat..back to dirt roads and no drains).

  13. Min, on March 12th, 2009 at 1:12 pm Said:

    John..I plead guilty to having been a Shire Councilor (the now defunct Lilydale Shire, now included in Yarra Ranges Shire).

    I should have known you had some expertise/ insider knowledge. That’s really great MIn, thoroughly enjoyed what you had to say.

    Sans’ feedback was also very insightful.

  14. As usual with the tabloid media we don’t have anything like the full story, so I’d be reluctant to conclude that lots of people are getting in over their heads on the basis of this one item. Maybe Dom and Carla have doting parents who’ve guaranteed the loan.

    We read on all sides that the biggest problem facing the economy is that financial institutions won’t lend money. If the housing experience suggests that’s not true then it’s probably a good news story. But as I say, I suspect there’s more to it than meets the eye.

    The increase in demand for new homes probably reflects lots of factors including but not limited to the grant. It’s a great target for stimulus spending because it has a big multiplier effect and the spending occurs comparatively quickly. I’d be surprised if the government didn’t extend the operation of the existing grant although they should remove it for existing housing, where it is the worst kind of pointless income churning designed to increase dependency on Da Guvmint.

  15. Wouldn’t there need to be a whole re-think on the lot, given that cities and towns formerly located, for one agricultural or industrial reason or another (said original reason now usually buried under asphalt), exist now as ends in themselves and are somewhat abstracted from their environments? Also, why wouldn’t those dwelling issues be concentrated four-dimensionally, as opposed to a two-dimensional dispersal model, which is inefficient?

  16. Legion..re the 4th dimension…In 1827 Möbius realised that a fourth dimension would allow a three-dimensional form to be rotated onto its mirror-image..

    Perhaps the above is something that can be worked on.

  17. Min, on March 12th, 2009 at 3:56 pm

    And to think somebody was mentioning ‘Dark City’ on another thread. 😉

  18. The Illuminati’s “all seeing eye” affordable home:

    8)
    N’

  19. N’

    How much?

  20. …and one of my old party tricks – The Moebius Strip…kids (and adults love it) …

  21. It all comes down to supply and demand. I think the Federal Government are onto the problem, hence the reason they may be re-considering extending the first home – buyers grant. I’d be surprised if there isn’t a major drive for meeting the demand in the near future, by the government.

    Housing shortfall, prices ‘to skyrocket’
    http://news.smh.com.au/breaking-news-national/housing-shortfall-prices-to-skyrocket-20090311-8uz1.html
    There’s plenty of land to build upon but that’s unlikely to stop housing shortfalls and prices from skyrocketing in the next 20 years, a new report shows.

    In a report commissioned by the federal government, the National Housing Supply Council has confirmed there is plenty of land available for development on the fringes of Australia’s major cities.

    But without significant government and industry intervention the nation’s housing crisis could increase tenfold by 2028, the report said.

    In 2008, the housing shortfall was about 85,000 dwellings.

    In three years’ time the number was expected to reach 203,000 and hit 431,000 by 2028.

  22. “How much?”

    Only your soul John…:)

    what about relocatable & transportable homes? Does the First Home Owner’s Grant apply to those?

    N’

  23. Nasking,

    “what about relocatable & transportable homes? Does the First Home Owner’s Grant apply to those?”

    What about a nice camper trailer? 😉

    Seriously though, the grant should only be for building new homes in the future, to encourage efforts in meeting the expected shortfall.

    Otherwise, for existing homes, it just drives up the prices because it gives people more money to bid with. Maybe that was their intention recently, to facilitate a gradual deflating of the housing bubble?

    Anyway, any extension of the grant should be mainly supporting new housing stock, I reckon.

  24. I can imagine apartment buildings are going to be rising from the suburbs soon. Toronto is littered w/ them. Still, they were affordable & comfy for awhile. Problem is they can turn into poverty traps.
    N’

  25. Nasking, we are getting there already.

    Some of inner Perth is starting to have houses built boundary-to-boundary on small blocks, usually 2 story.

    Might as well call them “row houses” as in England.

    No yard for the kids to play in, but then again they all sit around playing computer games and on the internet these days. (And we wonder where the obesity epidemic comes from…?)

  26. “It all comes down to supply and demand”

    Totally agree John.

    However what I don’t understand is the continuing mantra that there is a “housing shortage.”

    If this were the case, then property prices in NSW, VIC and WA would be bouyant without the increase to the first home owners grant.

    The property market in these areas (in terms of $ value) is sluggish if not, decreasing, and is only being sustained at the lower end by first home buyers entering the market due to the FHG.

    I really can’t see anything evidence that prices are about to “skyrocket”.

    If anything there is more incentive for renters to enter the property market at the lower end – which seems to be having the desired effect of propping up the building industry – while prices at the top end, I imagine, are only going to plummet further.

  27. And thanks for just posting the link plus your take on the editorial – a much more reader friendly experience!

    🙂 🙂 🙂

  28. Reb

    Glad I could assist Reb (wink)

    I take it to mean that beyond the current crises where housing affordability (renting or owning) are currently unsustainable in many parts of Australia. The market has gone soft at the moment for obvious reasons.

    As population continues growing it would be a big mistake to ignore the shortage simply as an attempt to try and artificially prop up prices by providing incentives to first homeowners to counter price deflations.

    It’s been mentioned that both Treasury and the Reserve Bank have been counting on the lack of housing supply in Australia to stop prices from plunging as they have in the US and Britain. But what happens when housing has been overpriced and unemployment run counter to the market, as it currently is?

    I think the problems associated with unaffordability are much more pressing than the desire to maintain current market prices. Housing prices and rents are well out of line with incomes.

    I refer back to Seriously ‘Unaffordable’ Housing
    https://blogocrats.wordpress.com/2009/01/27/seriously-unaffordable-housing/

    You mention:

    “If anything there is more incentive for renters to enter the property market at the lower end – which seems to be having the desired effect of propping up the building industry – while prices at the top end, I imagine, are only going to plummet further”

    From what I’ve seen many traditionally lower end properties have been bid up to extremely high price levels in recent years as well as the top end.

    Take the example of Domenico Monardo, 21, and his girlfriend, Carla Hirigoyen, 20. The couple recently paid $305,000 for a 594sqm block of land at The Ponds, a new Landcom development near Kellyville in Sydney’s northwest. They will borrow a further $240,000 to build their dream home. It’s not exactly the high end of town.

  29. Reb…I think you’re right when you challenge the assumption that prices will continue to skyrocket simply because of the housing shortage. As long as supply remains grossly inadequate, the market is likely to remain volatile rather than well balanced – also think of the limits this places on consumer spending. Adequate supply should help stabilise prices and therefore support the growing population at more affordable levels affordable. We certainly aren’t going to see any major increases in wages to meet higher prices for some time to come.

  30. What about a nice camper trailer?

    sreb, right up your alley I would have thought! 😉

  31. nasking, on March 12th, 2009 at 5:45 pm Said:

    “How much?”

    Only your soul John…:)

    What soul? I’ve already sold it. Can’t sell it twice can you?

  32. “Might as well call them “row houses” as in England.”

    Good old Corrie eh? Yea, pretty ugly…but they can serve the purpose. Better than living on the street.

    Ironically, ‘At the Movies’ this week reviewed a film along similar themes Elise:

    Of Time And The City
    Rated M
    Review by David Stratton

    Returning to filmmaking after an eight-year absence, Terence Davies’s OF TIME AND THE CITY has been described as a documentary, but that’s not a very apt description.

    This is a highly personal, largely autobiographical film, in which the director of the sublime DISTANT VOICES STILL LIVES and THE LONG DAY CLOSES reflects on the city, Liverpool, where he was raised…

    He notes how the rows of workers houses were replaced in the 60s by high rises which have since been vandalised and abandoned. One of the finest sequences shows this transition which is accompanied on the soundtrack by Peggy Lee’s version of “The Folk who Live on the Hill”.
    (At the Movies site)

    http://www.abc.net.au/atthemovies/txt/s2502181.htm

    N’

  33. “What soul? I’ve already sold it. Can’t sell it twice can you?”

    John, you don’t come across as a MEPHISTO to me…:)

    N’

  34. the repeat comment

    w/ “nasking, on March 12th, 2009 at 8:24 pm Said:”

    is not me strangely.

    particularly as it has

    “Oops…forgot to say great post! Looking forward to your next one.”

    on the bottom.

    Twilight Zone stuff…:)
    N’

  35. “Might as well call them “row houses” as in England.”

    Good old Corrie eh? Yea, pretty ugly…but they can serve the purpose. Better than living on the street.

    Ironically, ‘At the Movies’ this week reviewed a film along similar themes Elise:

    Of Time And The City
    Rated M
    Review by David Stratton

    Returning to filmmaking after an eight-year absence, Terence Davies’s OF TIME AND THE CITY has been described as a documentary, but that’s not a very apt description.

    This is a highly personal, largely autobiographical film, in which the director of the sublime DISTANT VOICES STILL LIVES and THE LONG DAY CLOSES reflects on the city, Liverpool, where he was raised…

    He notes how the rows of workers houses were replaced in the 60s by high rises which have since been vandalised and abandoned. One of the finest sequences shows this transition which is accompanied on the soundtrack by Peggy Lee’s version of “The Folk who Live on the Hill”.
    (At the Movies site)

    http://www.abc.net.au/atthemovies/txt/s2502181.htm

    N’
    Oops…forgot to say great post! Looking forward to your next one.

  36. Jesus, Nasking, that “all-seeing-eye” Illuminati treehouse gives me the creeps.

    Looks like a home for Giant Radioactive Mutant Wasps. Where’d you find the damn thing anyway? In the woods outside Chernobyl?

    As for Jack & Dianne, sorry, Domenico and Carla, they’ve put themselves (..lemmie see…counts fingers & toes…$305K +$240, less $21 + $3), $521K in the hole for their little bit of Paradise.

    They’ll be paying that kind of Mortgage-off for a good decade after they’re both dead unless one or other of them is doing rather well in the Drugs trade.

    Repeat after me: Little boxes…little boxes…and they”re all made out of ticky-tacky…….Little boxes…little boxes………..

  37. “They’ll be paying that kind of Mortgage-off for a good decade after they’re both dead unless one or other of them is doing rather well in the Drugs trade.”

    One would think so Evan…but we live in a country well under-valued. Til lately.

    Sure, I think some have over-burdened themselves by going beyond the ability to AFFORD a HOME based on one employed individuial minus 30%…

    but they’re a stalwart lot here when the oldies have a say & give the young folk a stern message and support. It’s a small population…and less confused than that we see in America, Hong Kong, Japan…they KNOW here, generally, how to DIG IN…and FIGHT…& take their losses and MOVE ON, if need be.

    I’d be PROUD to have a kid here…frankly.

    Sometimes we have to learn to LOOK AWAY. Or look to the OTHER WAY to survive.

    But a good meal w/ some discussion always helps. Accepting DIFFERENCE before we lose everything to the SAD. Like

    THe DEPRESSION.

    And sometimes REMEMBERING how Michael Cane, Bryan Brown, Nell Schofield, Noni Hazlehurst, Brenda Fricker began…

    and the friends…spouses…partners…of…

    well, just remember…you…WE…

    are THE NEW…WORLD

    let’s try not to make the same mistakes…:)

    (Southland Tales Score – 3 Steps)

    Just KNOW THEY KNOW it.

    They’re COMING. Here…behind you.

    turn that wheel Evan, I’m w/ you.

    N’

  38. But do me one thing Evan…

    don’t BELIEVE the American people are a bad people.

    Something WICKED their way came.

    My friends there…& allies…are about to end IT.

    Dream them HOPE.

    And live them POSITIVITY.

    And listen to their history…smile at the OVERCOMING.

    Shake their outreached hand.

    When THE TIME is LIGHT.

    Ride the bike…as fast as you can…
    N’

  39. Southland Tales – Score: Aerial

    N’

  40. It’s worth saying again: “One of the most significant weaknesses we have today, and especially in this climate, are state government’s like NSW, in my opinion. They’ve grossly mismanaged state finances over the last decade not to mention health, transport, education etc, and they’ve got the gall the hire more spin doctors to try and create the illusion that they’re competent and in control. ”

    Contracts send jobs overseas
    http://www.news.com.au/dailytelegraph/story/0,22049,25178797-5001021,00.html
    NATHAN Rees has been dubbed the Premier for workers in China after revelations that State Government contracts are sending thousands of NSW jobs overseas.

    As the number of unemployed in NSW rose yesterday to the highest level in a decade and the jobless rate reached a national high of 5.8 per cent, The Daily Telegraph can reveal the State Government is creating thousands of jobs in China at the expense of Sydney workers

  41. Evan

    “As for Jack & Dianne, sorry, Domenico and Carla, they’ve put themselves (..lemmie see…counts fingers & toes…$305K +$240, less $21 + $3), $521K in the hole for their little bit of Paradise.

    They’ll be paying that kind of Mortgage-off for a good decade after they’re both dead unless one or other of them is doing rather well in the Drugs trade.”

    My thoughts exactly Lol

  42. “The Daily Telegraph can reveal the State Government is creating thousands of jobs in China at the expense of Sydney workers”

    Who do you work for John?
    N’

  43. Elise, we know that interest rates fluctuate and lower interest rates are only a reprieve. Mortgage stress comes about mainly because of the level of debt people are carrying. Interest rates cannot remain this low indefinately nore will we be able to contain inflation indefinatley

    Households rescued from mortgage stress
    More rate cuts coming, but emergency cut unlikely
    Recent interest rate cuts have provided welcome relief for mortgage belts across the nation ahead of what is expected to be a tough new year for many.

    Some 350,000 households have been rescued from mortgage stress on account of the rate cuts according to the Housing Industry Association (HIA). And the easing of pressure has been felt right across the country with all areas experiencing a less strain over the last four months.

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