Over the weekend, the New South Wales Government revealed that it would extend the $15,000 first home owners’ grant (FHOG) on newly constructed dwellings until 2016 amid signs of life in the construction sector. From Property Observer:
The first home owner grant was due to be reduced to $10,000 in six months time on 1 January, 2014. It now has another two years at $15,000 during which developers and home builders will pursue the recently hesitant first home buyer constituency.
“We’re saying to every first home owner across the state, if you are thinking of buying – think new,” Mr Baird said.
Mr Baird claim the incentive announced in last year’s budget to take effect in October was “already seeing signs of life in the critical housing sector.”
Critics have suggested the grant’s new home limitation has meant there has been a luke warm take-up by first time buyers who have traditionally sought established homes…
The FHOG was doubled in the expressed hope of “kick-starting” the state’s lacklustre home building industry…
The NSW stamp duty concessions for first homebuyers of new homes will remain, Mike Baird advised in the lead up to the 2013 State Budget.
This is a good move by the NSW Government, which has also recently taken tentative steps to reform the state’s highly restrictive planning system. New home construction had weakened significantly since the mid-2000s, with the number of homes constructed falling by around 50% from the mid-2000s at a time when population growth surged (see next chart).
Since the FHOG was changed in October 2012, whereby grants on pre-existing dwellings were removed in favour of a larger $15,000 grant on newly constructed dwellings, construction activity looks to be picking-up, with both the number of dwelling approvals and finance commitments on newly constructed homes showing marked improvement, albeit from a low base and mostly in the apartment segment (see below charts).
Extending the $15,000 FHOG to 2016 is likely to extend the duration and magnitude of the construction bounce, relieving pressures on Sydney’s tight housing market whilst also stimulating activity across the state as the mining boom unwinds.
