Retention of First Home Owners Grant

The Real Estate Institute of Australia welcomes the public announcement by the Federal Treasurer, Peter Costello, during his Budget speech on 14 May 2002 that the First Home Owners Grant would remain at $7,000 from 1 July 2002. The Grant is provided for first homebuyers in new and established houses.

The housing industry has in large part been responsible for the robust economy in Australia during the worldwide recession over the last two years. For example, Access Economics recently concluded in Business Outlook December 2002, that "building new homes and renovating old one accounts for just one twentieth of all spending in Australia. But it has driven almost a third of all growth in Australia in the past 18 months. The tremendous surge was driven by record low interest rates and top ups to the First Home Owners Grant, which lifted activity from its post-GST low".

A 2002 CEDA report titled "Future Directions in Australian Social Policy" stated that the home ownership level for people of cohort 25 to 34 years old has dropped by 10% in the period 1981 to 1996. Similarly, census data shows that the overall home ownership rate amongst all Australians has dropped from 69% in 1986 to 67% in 2001.

The CEDA report concluded that "…in the face of a contracting ownership sector and expanding private rental market, the policy issues for a new social settlement revolve around how to extend many of the benefits of ownership to those who are not now, or may never be, owners.' "In a new social settlement it is worthwhile to remember the philosophy embedded in the old housing policy is about much more than bricks and mortar. Housing markets shape urban and regional forum and the liveability of cities and regions." In essence, home ownership is an integral part of cultural development, social stability, economic welfare and community development. However, the current nature and scope of State property taxes, including stamp duty and land tax, is significantly discriminating against home ownership and undermining social settlement.

A decrease in home ownership is apparently contrary to the Howard Government's commitment towards self-funded retirement, which will certainly result in a potential burden on the Commonwealth Government. The First Home Owners Grant offers greater financial security for all households, which means less Government outlays for social security programmes and less Government need for taxes. The $7,000 grant is a sound investment to help reduce social security spending by Government.

For further information contact the REIA Secretariat at reia@reiaustralia.com.au

May 2003