Prime Minister Kevin Rudd has hinted that the $21,000 first-home buyer's grant which is credited with giving a boost to the real estate market might not be continued beyond its current deadline of June 30.
'We should all underline the fact that all good things at some stage come to an end. We've been clear in our announcements about how long this programme would last,' he said.
The Government raised the grant in October from $7000 to $21,000 for new homes and to $14,000 for existing homes, to help insulate the industry from job losses caused by the global financial crisis.
The boost, which was part of the $10.4 billion stimulus package, sparked strong demand from first-home buyers, with nearly 30,000 people accessing the scheme between the middle of October and the end of January.
The property industry urged the Government to continue the boost for new homes, or at least phase it out in stages.
Housing Industry Association chief economist Harley Dale said the boost had been propping up housing construction activity. 'It's quite clear in recent months it has had a very real, positive impact on the level of building activity and therefore the level of demand for employment and building materials,' he said.
Dale said building approvals had been creeping up and HIA surveys showed new home sales had surged in early 2009. But without the boost, an important stimulus for the sector would be removed.
'We really need domestic demand to pick up strongly. Housing and construction is a very important part of Australia's domestic economy,' said Rod Cornish, head or property research at Macquarie Bank.
Cornish explained that a doubling of the grant to $14,000 for new homes and lower interest rates caused a jump in housing construction in 2001. Housing commencements leapt 50% in the year to March 2002, helping Australia to avoid the recessions Asia and the US experienced at the time.
But the grant was reduced to $10,000, then $7000, in middle of 2002. This contributed to construction declining in early 2003.
Opposition housing spokesman Scott Morrison urged the Government to give home buyers certainty. 'This is placing young home buyers under terrible pressure while they are trying to make one of the most important financial decisions of their lives,' he said.
