Thursday, May 14, 2009

The federal government’s six-month extension of the first home owner grant (FHOG) boost has been criticised for being too short and announced too late.

The boosts, which gives first home buyers an extra $7,000 when purchasing an established home and an extra $14,000 for new homes, were due to end on June 30.

The federal government said in its 2009/10 budget on Tuesday the initiative will be extended for six months.

The full boost will continue homes purchased on or before September 30 this year.

It will then be halved for purchases up to December 31, 2009, and after that date the $7,000 first home owners scheme continues in its original form.

Mortgage lender Resi Mortgage Corporation said it was unfortunate some borrowers would have rushed into home purchases as the June 30 cut-off point for the grants approached.

“However, for those still in the hunt for a home, the federal government’s last minute announcement to extend and then phase out the boost to the FHOG over the next three to six months can now offer them a fresh opportunity to take their time and plan ahead,” Resi head of consumer advocacy Lisa Montgomery said.

The Real Estate Institute of NSW (REINSW) warned a key driver of economic recovery could suffer as a result of the six-month extension.

“With no certainty difficult economic times won’t continue into 2010, the grants should have been extended for the full financial year,” REINSW president Steve Martin said.

“The sooner the property sector recovers, the sooner the rest of Australia will start to enjoy better economic times.

“But the fact is we are only starting to see the beginnings of recovery in the property sector and the best is yet to happen. It is short sighted of the government to think this will happen before Christmas.”

Other groups are supporting the government’s move.

Mortgage Choice said the extension, and a focus on infrastructure projects around the country, would support the property market and construction industry.

“The newly announced initiatives will continue to support the job market and, as importantly, will enhance consumer confidence,” Mortgage Choice spokesman Kristy Sheppard said.

Meanwhile, the Retirement Village Association says the FHOG has contributed to a small recovery in the retirement village sector by putting potential residents in a better position to sell their homes. “Sales rates are beginning to improve and new equity is coming into the industry,” RVA president Simon Owen said.

AAP