A federal scheme to give homeowners cash grants of $25,000 to build new homes or renovate existing properties will give the real estate market a much-needed boost but will not drive up prices, housing experts say.

The $688 million HomeBuilder program was announced as part of measures to boost the construction industry and will apply to contracts entered between June 4 and December 31.

It is aimed at supporting 140,000 direct jobs and another one million related jobs in the residential construction sector.

The grant will be available for existing property owners and first homebuyers seeking to build or improve a home or investment property.

To be eligible an individual must earn less than $125,000 a year and a couple less than $200,000.

The value of the property must also be less than $750,000 for new builds, while renovators will need to spend more than $150,000 to qualify. The pre-renovation value of their home cannot exceed $1.5 million.

Some renovation works such as swimming pools, tennis courts and garages will not be covered by the scheme.

Realestate.com.au chief economist Nerida Conisbee said the scheme was not broad enough to drive a major change in prices considering there was little support for unit purchases.

CoreLogic head of research Tim Lawless said the scheme appeared to be better thought out than earlier incarnations of homebuyer grants, which merely inflated prices.

A widened grant for purchasers of new properties would be more effective in reining in housing affordability because it would help increase supply, Mr Lawless said.

The problem with the earlier grants, such as the First Home Owners Grant rolled out during the global financial crisis in 2009, was that it increased demand but constrained supply, he said.

Homebuyers were able to use the grant for both established and new homes but tended to use it mostly for established purchases. This led to an increase in prices, which muted the effectiveness of the grants.

Mortgage Choice CEO Susan Mitchell said the HomeBuilder grant would boost buying activity but the handout wasn’t sizeable enough to start a “flood” of activity that would drive up prices.

“The first homeowner (grant) introduced by the Rudd government brought forward a lot of demand in 2009 and 2010 and then there was a steep drop off … this scheme is very different,” Ms Mitchell said.

Prime Minister Scott Morrison said Thursday that the scheme was aimed primarily at boosting the construction industry.

“This investment isn’t just about helping Australians bring their dream home to life, it’s about creating jobs and helping support the more than one million workers in the sector,” Mr Morrison said.

Property Council of Australia CEO Ken Morrison said the grants would be a “circuit breaker” to boost consumer confidence.

“Demand for new housing construction was threatening to fall off a cliff over the next six months. This new scheme will help switch on sentiment and save jobs at a critical time for the economy,” Mr Morrison said.

Property Investment Professionals of Australia chairman Peter Koulizos said the HomeBuilder scheme will be a welcome shot-in-the-arm for the construction sector.

“Not only will it help more first home buyers into the property market, but it will also allow current homeowners to upgrade to a new dwelling or to update their current home, which can improve their financial futures,” Mr Koulizos said.

“The restricted time frame of the scheme as well as the requirement for projects to begin within three months of the contract date will also help to prevent profiteering from unscrupulous operators.”

Mortgage Choice broker James Algar said the scheme could be effective in encouraging would-be buyers who were sitting on the fence to snap up a home.

But it would also have a limited impact in most of Sydney because new properties were concentrated in only a few areas and most were priced well above $750,000.

Aidan Devine, news.com.au, 4 June 2020
https://www.news.com.au/finance/real-estate/sydney-nsw/homebuilder-scheme-25k-grants-for-new-builds-renovations-will-boost-construction-but-not-prices/news-story/eec70e419a9efc18a0f369324d0b37e4?btr=b4d6de5f984bad29d53830e96812f523