Government Grants To Change?

Posted by Daniel Joseph

Much like many aspects of business in Australia, the government has a heavy hand in the property market. Current grants aimed at new builds from the federal and state governments to help first home buyers into the market are failing. Besides the grants’ design to help first home buyers, they are supposed to be a double edged sword for the government – if more first home buyers are purchasing they are supporting construction, a major employment sector, and therefore helping the overall economy.

Looking at the data series from the Housing Industry Association (HIA) we can see the results of approval levels currently in 2013 for the following states.

NSW – Tracking slightly above the 16.5 year low set in December 2012

VIC – Currently at the lowest point in the 16.5 year history of the series

QLD – Currently at the lowest point in the 16.5 year history of the series

SA – Tracking slightly above the 16.5 year low set in December 2012

WA – Substantial improvement, with house approvals at 2009 levels and trending higher

So, as we can see the levels of the approvals are trending down everywhere except in Western Australia. If there was strong demand from first home buyers then approvals would trend up as more developers try to capitalise on demand.

So what does this mean? It means the government is receiving less revenue due to a fall in stamp duty (state) and developer contributions (council), while shrinkage in employment in the construction sector means less income tax (federal).

The Conclusion?

As budget time looms in the next few months it would not be surprising to see further interference in the market from all tiers of government looking to increase the level of turnover in new land sales via government incentives.

Posted by Daniel Joseph, on 19th Jun 2013