Economist slams Victorian government’s move to help home buyers

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Sydney Homes
A newly-constructed home is listed as sold on an advertising board in the Sydney suburb of Greenhills Beach, Australia, August 2, 2016. Reuters/Jason Reed

The government declared on Sunday that it will dismiss stamp duty for first home buyers looking to buy a property less than $600,000. AMP chief economist Shane Oliver has reacted to the Victorian government’s latest move, saying it does not really help.

He forecasted that affordability of properties in Victoria might deteriorate, relative to income. If New South Wales opts to follow Victoria’s move, Oliver said it would be a mistake.

Homes listed up to $750,000 are being offered at a discounted price and the government reportedly said it will double homeowner grants for those making a purchase in regional Victoria to $20,000. But the chief economist seems not pleased. “It sounds like you’re doing something about it but doesn’t actually help,” he said.

Oliver said those who decide to purchase a home before the price is adjusted would benefit, but the move will only increase the prices. He pointed that grants only work well when one wishes to stimulate the economy by the time the market is depressed.

Furthermore, Oliver sees a problem in the restriction of concessions to properties less than $750,000. He said the offer will only result to more demand for homes under the said amount.  “Ultimately it could have the effect of pushing houses further out of reach of first home buyers,” has quoted him saying.

“But when the market is already very hot, it usually just pushes prices up and the only beneficiaries are the existing homeowners,” he explained. The AMP chief economist believes that the government must also boost the housing supply. He proposes that it would be a smarter move if the government will instead push to boosting supply, which may be done through opening new areas for development, spending up approvals for land releases and financing infrastructure.

Taj Singh, co-founder of First Home Buyers Australia, agrees with Oliver in relation to the boosting of housing supply. He expressed concern that several people may wait until July 1 to sell their property because they may think it is an ideal time to get a higher price.

“This may put upward pressure on the market in the very short-term due to lack of stock — which could mean that first home buyers face higher prices come July 1,” Singh said. As a part of the government’s cost-of-living package, Premier Daniel Andrews earlier announced the offers, which is expected save 25,000 first homebuyers an extra $8000 a year.