Cynics might consider it more self-interested than interesting.
With the real estate market in the doldrums, enticing first home buyers back is considered an important factor in moving the market.
A doubling of the grant would do that, but if history is any guide it will also push up prices first home buyers pay – negating any benefit to those buyers.
So the real winners are the sellers who get more for their house and the agents who collect more in commission.
With the number of sales falling and prices continuing to decline (according to RP Data, Hobart house prices are down nearly 10% over the past year) it’s no surprise to hear calls for stimulus.
However, I’m more concerned for the first home buyers who overpaid amidst the frenzy of the previous doubling of the grant.
Many have seen their house continue to fall in value and if they’d waited they could saved more and paid less.
First home buyers need to realise – despite what the vested interests say – there’s little help for them in doubled grants, or lower interest rates when buying a house.
That may sound strange, but the one thing never mentioned when talking about affordability for first time buyers, is the one thing that really matters – lower prices.
If prices continue to fall, the real winners are patient first home buyers because they have more time to save a bigger deposit and they can wait for the market to come back to them.
It also puts first home buyers in a position of power to negotiate further discounts.
The result will inevitably be a smaller home loan and significantly less interest to repay.
This is why first home buyers should be wary of calls to drag them back into the market.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you want help with your financial future, we’re arguably the best financial advisor in Australia.
