PREDICTIONS of a building industry boom following the introduction of a $15,000 first home owner grant for new homes may backfire on the state government and drop the prices of established homes, according to mortgage broker Vince Ferrito.
From October 1 the $7000 grant for first home buyers was axed and replaced with a $15,000 grant for new homes only.
Central Tablelands Finance’s Mr Ferrito said the change could price some buyers out of the market or see borrowers take on more than they can afford.
“If someone wants a basic three bedroom home they’ll now have to spend an extra $100,000 just to get a small handout from the government. The ones that can’t will be excluded from the market altogether,” he said.
Banksia Building owner Mick Banks expects the grant to boost building locally, despite the scarcity of vacant land in Orange.
“There are certainly a couple of people relying on [the grant] to get into a house,” he said.
“The bigger problem at the moment is finding land that you can build on. Subdivisions are opening up, but they’re pretty slow to get underway.”
With established homes in Orange starting at about $150,000, Mr Ferrito said it was easier for first home buyers to meet loan repayments, whereas new homes were at least $340,000.
“It’s going to backfire on the government. The established house market is going to slow down and people selling existing homes will have to drop their prices to entice buyers,” he said.
Mr Ferrito said the push to reignite the building industry could still have been achieved if the $7000 grant for established property was retained and new home grant dropped to $10,000 with stamp duty exemption.
According to figures from Orange City Council, 248 development applications for houses and 35 units or dual occupancies were approved in the 2011/12 financial year, up on the previous year when 205 houses and 62 units were approved. In 2009/10, 227 houses and 88 units were approved.
But McCormack Barber Real Estate’s Peter McCormack expects the changes to have little to no impact on the market because most first home buyers rushed in to take advantage of the state government’s stamp duty concessions before they ended in January 2012.
Mr Ferrito said it was rumoured some builders took advantage of the boom by raising their prices, but Mr Banks said local builders would not.
“Naturally building products go up,” he said.
“For first homeowners people will shop around.”
Mr Banks said north and west Orange were the quickest growing areas, but new subdivisions could be up to 12 months away.