Juicing the NSW housing market

Around Australia first homebuyers are like coiled springs just waiting to be released. NSW has found a way to release that stored energy and, while it's early days, first homebuyers appear to have started a scramble for dwellings, which will transform the outlook for the NSW home building industry.

And because NSW is Australia's largest market it will also transform the national home building industry although similar grants by Queensland have not yet had the same effect on first homebuyers, while the Victorian Government may have stumbled.

Just 11 days ago, on October 1, NSW introduced a package of measures aimed at delivering around $35,000 to first homebuyers of new dwellings priced at or under $550,000. There are also substantial, but lesser, benefits for those who buy new dwellings up to $650,000.

Combine those NSW measures with the recent cuts in interest rates and the prospect of further rate reductions and the stored first home buying energy is being released.

NSW existing home owners (and real estate agents) may be a tad nervous because first homebuyer spending is directed only at new homes.

But last night I was yarning to Australia's largest apartment builder, Meriton's Harry Triguboff. He was up beat.

A year ago first homebuyers were around 5 per cent of the Meriton market, which was dominated by Chinese buyers. In the last three months Chinese buying has subsided because of the uncertainty at home and fears about the Australian dollar.

But in the last 11 days Meriton orders from first homebuyers have soared and currently represent 45 per cent of all Meriton Sydney apartment sales.

Meriton is able to price apartments at $550,000 and developments in the outer Sydney areas like St Ives and Warriewood have been big beneficiaries. However, in some inner city developments smaller apartments are priced within the $650,000 cap.

While Triguboff may have had Meriton ready to take full advantage from midnight on October 1, the momentum in Meriton will spread to the remainder of the Sydney new home market, especially in the outer suburbs where the $550,000 price point can be reached.

No one is sure why Brisbane did not immediately respond but it would seem that the severity of the state government cuts and the fears about what will happen to coal mining would have played a role. Again it is early days and addition a large part of the Brisbane building skills base is employed constructing the mines.

In NSW, the $35,000 benefit to first homebuyers purchasing dwellings up to $550,000 is made up of a $15,000 grant and stamp duty relief. In dwellings priced at $650,000 there is no stamp duty relief but the grant continues. First homebuyers can be investors and receive the grant. However the grant is reduced to $10,000 in 14 months -- December 31 2014.

Victoria had a very favourable first homebuyers grant but slashed it to $7,000 on July 1. It has stamp duty concessions but they are not as good as NSW for new homes.

By targeting new homes, NSW is lifting the supply of dwellings in the building industry and hoping that the lower interest rates will look after existing homes.