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$2Billion in FHOG's since Oct 2008!

Discussion in 'Real Estate' started by Jacque, 22nd Sep, 2009.

  1. Jacque

    Jacque Team InvestEd

    16th Jun, 2005
    It's an emotional topic and one in which opinions are definitely divided. Was the federal govt right in doling out so much money to boost the housing market or not?

    Interesting comments here in the most recent Domain feature and blog...
  2. Chris C

    Chris C Well-Known Member

    2nd Apr, 2008
    Brisbane, QLD
    In response to the "was the govt "right" in offering the grants or not" I think the answer yes and no.

    Big nationwide property price falls crush economies. It's just a sad reality that most Australian households have a massive chunk of their wealth tied up in their own home. So big housing price corrections are generally quite debilitating for wider economy that is driven by consumption, often "frivolous" consumption.

    So was the government right? well you have to say having watched the US and UK property markets tank and taking their economies with them you can't "blame" the government trying to throw a little fuel onto the embers that were left from the Australian house price explosion.

    So I can see that the boost probably helped in the short term. Over the longer term you have to think that what will be will be and eventually the mountains of both government and private household debt will need to be repaid and at this point I'm sure growth in the property maker will be a lot leaner.

    So IMO probably the right decision looking at it from the short term, but it won't make a difference in the long term therefore was probably a waste of money.

    As for that article you linked to I thought these two points were interesting ideas...
  3. D&K

    D&K Well-Known Member

    14th Nov, 2005
    Success and failure.

    It was a success in helping keep many builders, electritians, plumbers, carpenters, REAs and loan managers, etc, employed and solvent when major building projects were failing through lack of off-shore funding. So good for employment, but I think the question was more about property :p

    As first home buyers generally buy below the median price band, more activity in this segment should lower the median house price. However, the funds flow through to the providers (those identified above) exactly the same as they did last almost ten years ago. This helped trigger the last boom ... which was at higher interest rates (now higher prices take their place). Ironically, it's this housing segment that inflates the most, at the expense of first home owners who didn't get the grant. So it's another longer-term failure on that count.

    Prices then flowed through to houses in the median price band. The fundamentals of supply and demand here have been less influenced by the FHOG, and its been pretty dull there for some years now. It seems to be starting to move now ;) Minimal impact from the FHOG.

    Comparisons with the US and UK, like this article, are always dangerous. The great US housing collapse is not as widespread as the media makes out. A few areas suffered really badly, others have done very little. If a previous president hadn't pushed lenders into funding those who couldn't afford to repay (and then bundling the loans into wierd financial instruments), we wouldn't see these headlines.

    The US and UK also have different housing stock (something that academic comprisons seem to miss). Our freestanding houses on their own urban-sprawl blocks are relative luxuries over there (excluding Hollywood of course). If we had a lot more people in attached housing, low-grade flats (UK & US) and trailer parks (US) :eek:, our house price to earnings ratio would be a lot lower too. Perhaps our ratio will drop as the McMansion craze dies, blocks become smaller, and cheaper apartments become more common.

    my 2c worth.