Investors Flock to Melbourne after FHB Grant Change

06 May 2013 - Steven Cross and Stacey Moseley from http://www.rebonline.com.au

First home buyers may be forced to the fringe of Melbourne after investors take advantage of the removal of grants by the government, according to one Victorian agent.

The Victorian government announced yet another change to the first home owner grant, removing the subsidy from buyers of existing homes, and increasing the package from $7,000 to $10,000 for new homes.

However, Rob Elsom, director at hockingstuart Brunswick told Real Estate Business that investors may reclaim the lower end of the inner-city market.

“They’re giving the bonus to encourage people to purchase new properties which are further away from the city to support the outer areas and the building industry," he said.

“It’ll probably stabilise the lower end of the market … that end of the market is targeted by both first home buyers and investors, and we saw investors losing out because the first home owners had that grant to help them out.

“We may now see more investors come back into the market because they won’t be competing with as many first home buyers.”

However, senior economist at Australian Property Monitors Andrew Wilson said it would have a fairly neutral effect.

“Victoria changed its grants last year and although there was a slight surge in demand in the beginning of the year, Melbourne first home buyer numbers have stood up - they’re sitting around 18 per cent, which compares to just seven per cent in NSW which is an all-time low," he said.

“The changing of the grant from an existing market to a new market focus ... I don’t think it will really have a big effect, except to improve the budget position for the Victorian governments.

“First home buyers in Melbourne are a lot more connected to new home, outer-suburban fringe growth areas.

“This will help to build more new houses in those areas of Melbourne; there’s more incentive for those who may have chosen established properties to go into a new home. That said, Victoria is already the engine room for new home construction, so there’s plenty of construction to keep up with demand.”

But Mr Elsom, like many agents and consumers, wishes the government would make up its mind.

“There have been so many changes over the years that it’s hard enough for agents to understand the changes, let alone the consumer," he said.

“What the government has to do is draw a line in the sand and make a decision so they don’t need to change it again.”