The lengthening absence of data indicating any housing construction recovery – and accompanying credit growth – must be weighing on Treasurer Wayne Swan during his May budget preparations.
I suspect the deliberations will possibly come down to whether the federal government throws some money at the problem so that it takes effect this year or saves any announcement until the 2013 election year.
But the treasurer ought to be asking: does it necessitate anything being done, and what outcomes are desired?
Should any aid go directly into the pockets of the buyer, or indirectly to the seller? Or maybe into infrastructure.
Or does the housing construction industry simply need to realise that cycles are cycles, and no reason for a handout from government?
When presenting floral bouquets for effective lobbying the housing construction industry stands up there on the podium, albeit overshadowed by the car industry.
Indeed, Philip Soos says in his latest column that the real estate lobby is immensely powerful, representing the $4 trillion landowning class (Ending the entrenched real estate racket, March 20).
Take the long-running first home buyer’s grant, which has been around since its 2000 introduction by John Howard as part of GST compensation.
Soldier settlement assistance ran for about eight years following the return of soldiers from World War 1.
Bob Hawke's housing assistance lasted seven years in the 1980s.
New South Wales first-home buyer grants:
Source: NSW OSR
The current 12-year-long assistance package has periodically undergone a boost that triggers an even greater market distortion of the herd mentality among young buyers. It was Aussie Home Loans founder John Symond who first signalled the possibility that events might unfold this year.
Property Observer reported in January that Symond noted it was generally true that "in any run-up to an election the government throws money around”.
"Probably my cynical self says six to 12 months ahead of the next election, it would not surprise me that the government might stimulate housing by helping first-home buyers and they may possibly introduce a bonus or a boost to the first home owner’s grant,” Symond said.
The earliest date for the next federal election is August 2013 (unless the government calls an early election) and an election must be held by November 30, 2013, meaning if Symond’s prediction proves accurate the boost to the first home owner’s scheme could return in the latter half of the year.
The original boost scheme ran from October 2008 to December 2009 with the aim of cushioning the Australian economy from the worst impacts of the GFC.
Up until September 30, 2009, it provided first-time buyers with an extra $7,000 to purchase an existing home and $14,000 if they purchased a newly constructed home or built a new home.
The scheme operated in tandem with the $7,000 already on offer as part of the first home owner’s grant, which is still in effect.
Between October 2009 and December 2009, the first home owner’s boost was halved, with $3,500 available for the purchase of established homes and $7,000 for the purchase of new homes.
Symond says while no one can be certain of the boost returning, he tipped that "come federal election time there might be some handout for first-home buyers”.
But there was interesting debate this week about the effect of the grant for first home buyers.
Bendigo and Adelaide Bank chairman Robert Johanson who said that first-home buyer grants were only serving to unnaturally drive up the cost of housing.
"The government was just giving people money to get into new houses, which transferred the value to the sellers. It just puts costs up," Johanson said.
"I think it's a waste and a distraction," he said.
Johanson said the grants were "bad policy", and that the housing market had succeeded because of economic prosperity rather than government intervention.
While we all wait for prosperity, the home builders are offering varied incentives to attract buyers.
They give free air conditioners, they pay your rent while you build, even offer $5,000 barbecues.
This article first appeared on Property Observer on March 21. Republished with permission.