Low rates, grants spur new home sales

Well it's certainly delivered on the govt's aim to stimulate spending, at least in the housing market. I would expect, once the FHB's have had their fill (or the grant isn't extended) in about 6mths or so that builds will return to pre-Oct 2008 levels.

 

I was chatting with some mates the other day about the FHOG, and it dawned on me that just because their is a FHOG doesn't mean there are lots of people that can act on it. As in before you can claim the FHOG you need to be in a position where you can still service quite a large loan. So whilst the the recent doubling/tripling of the FHOG this may have enticed many who were both eligible for the FHOG and capable to buy into property to do so; I imagine that going forward that number of people who are both eligible for the FHOG and able to service a loan must be shrinking dramatically, especially given the younger segment of the market tends to feel the pinch a little more when it comes to rising unemployment.

So this raises the question in my mind, even if the FHOG is extended, can it continue to successfully draw new home buyers into the market?

 

Good point and naturally there's only a limited pool of buyers. From memory, I believe when the grant was first introduced back in 2000 it took approx 7-8 mths for the FHB's to "run out". After this period, FHB's naturally kept buying but the large majority of eligible buyers had done their dash.