Money for social housing, not home buyers grants, is the key to construction stimulus
The federal government has signalled it will offer cash grants of at least A$20,000 to buyers of newly built homes. Unlike past schemes that have targeted first home buyers, it seems these new grants will be available to everyone including upsizers and investors. Grants may also be extended to renovations.
Large handouts would prompt some more residential construction by encouraging some people to bring forward their home purchases. It’s why in 2008 the Rudd government tripled the first home buyer grant to A$21,000 for new homes in response to the Global Financial Crisis.
But under such schemes, governments also end up giving grants to people who would have bought a home anyway. Even the more pessimistic industry forecasts expect 110,000 homes to be built in Australia next year. Giving A$20,000 to all of these home buyers would cost A$2.2 billion without adding a single construction job. Grants of A$40,000 would double the bill.
That’s a lot of spending for little economic gain.
Nor do grants to home buyers actually make housing more affordable. They are typically passed through into higher house prices, which benefits sellers more than buyers. In this case, that is likely to include developers eager to clear their existing stock of both newly and nearly built homes.
More home-buyer grants on the way