Is Victoria's enlarged FHO grant a waste of taxpayer dollars

Published in the Australian Broker Online, May 2013 by Mackenzie McCarty

In a recent effort to pump up the state’s housing industry and offset the slowdown in the economy, the Victorian government increased the First Home Owner’s grant. 

From July 1, the grant will be increased from $7,000 to $10,000 for newly constructed homes and stamp duty for all first purchases will be decreased by 40%.

But while many first home buyers will be celebrating, Wealth Within chief analyst and regular ASX newsletter contributor, Dale Gillham, says he sees the move as a step in the wrong direction.

“I question whether this will achieve anything other than force families to move further out from the city and put pressure on resources by increasing urban sprawl. 

Today, people want to have access to good roads, public transport, shopping and entertainment and don’t want to have to wait years for it.”

He says the Victorian government has scrapped the original $7,000 grant, which allowed first home buyers the choice of either purchasing a new or an established property and replaced it with a $10,000 grant that can only be used to purchase new homes.

“Unfortunately, this limits first home buyers taking advantage of the grant to outlying suburbs like Cranbourne or Craigieburn and not everyone starting out wants that.”

In an interview with ABC News, Victorian Treasurer, Michael O'Brien claims families will be thousands of dollars better off.

"The average price of a newly constructed first home is about $400,000," he says. 

“With these announcements, Victorian families will be over $16,500 better off with the combination of the increased grant and the stamp duty cuts."

Yet, the question Gillham and others in the housing industry want answered is whether families will actually take advantage of the new offer, or whether it’s a waste of taxpayer money.

“If you choose to live way out in newly developing estates where supporting infrastructure can take years to eventuate, you have to question what you’re really getting for your money,” Gillham argues. 

“Perhaps better value can be found by looking closer in. 

More and more people are choosing new apartment-style living because they can immediately access established infrastructure, including shopping, restaurants and entertainment, good roads, trains, trams and bike tracks. 

All of this you as a tax payer have already paid for.”

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