Home grants: New-home buyers cheer, existing owners count losses

Mushrooming new homes are boosting suppy and forcing down the asking prices for existing properties. <i>Photo: ABC News/Graeme Powell</i>

Mushrooming new homes are boosting suppy and forcing down the asking prices for existing properties. Photo: ABC News/Graeme Powell

Marnie Williams and Honor Steinbeck had planned to start looking for a block of land sometime next year, until enticements too good to refuse rapidly accelerated their plans.

The dangled carrots came in the form of $25,000 from the Federal Government and then another $20,000 from the West Australian government.

Suddenly, blocks of land in the couple’s desired estate in the semi-rural suburb of Baldivis, around 45 kilometres south of Perth, were being snapped up fast.

Marnie Williams and Honor Steinbeck saw a great opportunity and took it. Photo: ABC/Rhiannon Shine

“When we saw everyone out there on the weekend, we thought we’d better get it now and not wait,” Ms Steinbeck said.

“I think we got the last one that is being built in the particular area we wanted,” Ms Williams said.

On top of fears they could miss out on a block, $45,000 in government grants was too good to pass up.

“It kind of felt like the sign we were looking for,” Ms Steinbeck said.

“It means that we can have a bit of a nicer home with the fixings that we want and won’t go outside of our budget, so it’s really good,” Ms Williams said.

Land sales soar

They were not the only ones to act fast off the back of the government grant announcements.

Real Estate Institute of WA (REIWA) President Damian Collins said there were 1,471 land sales in June, up 289 per cent on May.

“The large spike that we have seen in land transactions can be attributed to people fearing that they may miss out on these grants,” he said.

“If you were ever going to build a house, now is the best time you are going to see.”

New homes are popping up everywhere in Perth’s Baldavis suburb, where prices are down almost 20 per cent. Photo: ABC/ Armin Azad

But Mr Collins said he also had concerns.

“I think overall the amount of money that has been thrown at getting construction started is way too much,” he said.

“We did not need to spend $45,000 to get some jobs happening and my concerns are two-fold.

“Firstly, for people in the established market, those who are already sitting on a property, they are in negative equity in a lot of cases.

“All of a sudden their property is now out of the market by an extra $45,000 compared to brand new.

“But also concern for some of the people buying brand new properties in house and land.

“What you want to be thinking about is not just the free money you are going to be getting from the government, but also you want to be thinking about ‘what is the value of that going to be at the end?'”

House sale could bring debt

Jude Loza built her Baldivis home for $455,000 in 2015 and has a mortgage of just under $400,000.

She wants to sell so she can move back to New Zealand to care for her elderly parents, but said the best offer she’d had so far was $20,000 less than she owed the bank.

“We are looking at taking back debt to New Zealand with us and that’s heartbreaking,” she said.

“When we came here [to Australia], I came here with money. And we’re going to be leaving with debt.”

Jude Loza is looking at the grim prospect of a major loss on her home. Photo: ABC/ Rhiannon Shine

Ms Loza said she was already facing a loss prior to COVID-19 and the building grants, and now conditions had become even more tough.

“We’re up against a lot of vacant blocks that have been on the market for probably the last year,” she said.

“And now with the government offering this new package we’re finding that [buyers are] taking that up.

“What it’s actually going to be doing is pushing the value of our properties below what they’re actually worth.”

Prices slump

Baldivis was one of the most popular areas for new homes in 2015, but since then, house prices have fallen 19 per cent. House prices in Greater Perth have fallen by 12.3 per cent over the same period.

Finance data analyst Martin North said many of the hotspot postcodes for mortgage stress across Australia were in areas that had experienced high property development over the last decade.

He had concerns the building incentives could add to existing financial pressure, and urged people to think carefully before jumping in.

“People are effectively being bribed to go and buy,” he said.

“And I understand the reason, they [the government] want to try and get the construction sector fired up again, because it’s a big source of jobs.

“But there’s a couple of observations. The first is that the land prices tend to rise by the amount of those additional incentives, so people need to pay more.

“And secondly, by the time they’ve bought the land and developed it, the risk is that the overall value of properties continue to fall in the area.”

Who really wins from stimulus packages?

Mr North said developers, builders and tradespeople would be the biggest winners out of the stimulus packages.

“The risks and consequences to individual buyers and communities from these rather myopic strategies have not been fully understood yet,” he said.

“I look across the country, more broadly than just down south of Perth, and can see this again and again and again, with way too many properties being built in these outlying suburbs.

“And values are falling, people are being trapped, mortgage stress is rising, and unfortunately negative equity is a consequence as well.

“Unfortunately, this is part of the myopic picture of the way that property works in Australia.”

Spatial Property Group managing director Bruce Young said land sales had exploded since the government announcements, but he believed buyers were the biggest winners.

“I would say maybe a five or six-fold increase in [land sales, compared with] what there had been previously,” he said.

“But you also have to look at the flow-on effects to the economy.

“I think everyone benefits out of this, from the developers who are moving stock to the home builders who are moving their homes, and all of the trades and product suppliers as well.”

In a statement, WA Housing Minister Peter Tinley said the State and Commonwealth grants “unashamedly target building activity that will generate work in the building and construction sectors”.

“Not all households will be interested in building new homes,” he said.

“Those that take advantage of the grants will likely create churn at all price points in the home ownership market, providing opportunities for some households to exit private rental into ownership and/or free-up much needed rental availability.”

Mr Tinley said there were significant benefits to home ownership, which people could gain as a result of the grants.

“Numerous studies point to the benefits of home ownership on the health and wellbeing of individuals, including the education outcomes of children,” he said.


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