Victorian First Home Grants ‘A Cruel Hoax’

28 April 2013

MELBOURNE: – Victoria’s new Treasurer Michael O’Brien taunts first home buyers with a cruel hoax today, announcing grants for new build and targeted stamp duty concessions. He confirmed their role as a patsy for every property-based parasite in Australia.

“First home buyers are being bribed with their own money,” David Collyer Campaign Manager Prosper Australia said today.

“These grants and the extra borrowing power they create were capitalized into land prices by sundown. It is already too late for home-buyers to take advantage of this offer.

“Estate agents and property developers are now toasting Michael O’Brien in champagne.

“Not one cent of this gift will end up with builders or the modest citizens who simply want a home of their own.

The economic fallacy of first home grants is clearly explained by Prof. Steve Keen at:http://tinyurl.com/br7t8o5

“If this has the intended effect of inflating real prices, then it will set a new, higher peak from which an even bigger crash will occur. Our towering private debt burden will likewise increase.

“Inexpensive land should be an explicit civic objective, not the maintenance of high prices by rationing and government intervention.

If the Napthine government genuinely wanted to help young adults become full citizens in this property-owning democracy, it would lower the price of land, not act to drive prices higher. The Napthine government should:

• Instruct Places Victoria to accelerate the release of subdivided land and price competitively.

• Agree to more Precinct Structure Plans that currently restrict land-buyers to a handful of locales.

• Abolish Stamp Duty on ALL property transactions and fund this by removing the Principal Place of Residence exemption from State Land Tax.

An entire generation is currently excluded from home-ownership – except on the most oppressive financial terms. At 14.4 per cent of all buyers, first timers are at the lowest proportion of buyers since 2004 – in a market notable for its weak sales volume. They do not need incentives, they need a land price re-set.

“This initiative should be condemned by all.”

 

About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through Land Value Tax and Mining Tax.

4 Comments

  1. THEO29-04-2013

    It seems ‘legal’ corruption such as more FHB grants continues to be on the agenda for many newly elected governments. Being a FHB on strike. I for one will not accept the ‘legal’ bribe and I will continue to have a clear conscience for not having voted for any politician but placed a list of my complaints instead.

  2. Freda30-04-2013

    Agreed that the FHOGs are distortionary, but with respect to releasing more Precinct Structure Plans, how do you suppose the infrastructure – public transport, services, roads, and community/social infrastructure required in all the PSP areas will be funded? State agencies can’t keep up, local government can’t either, and the developers squeal every time when asked to provide that which is required. It may keep land prices down, yet would result in fragemented development and isolated and underserviced communities. Have to disagree with you on this one. We need instead to make it easier to go high density in established areas, reducing costs associated, and hopefully resulting in the development of better designed apartments that people actually want to live in

  3. Magnus Carlsen01-05-2013

    Freda said:

    “…how do you suppose the infrastructure – public transport, services, roads, and community/social infrastructure required in all the PSP areas will be funded? State agencies can’t keep up, local government can’t either, and the developers squeal every time when asked to provide that which is required.”

    Here is one possible solution Freda – municipal utility districts which have the power to issue development bonds to fund development costs over long periods e.g. 20 – 30 years.

    http://www.macrobusiness.com.au/2013/03/a-better-way-to-fund-housing-infrastructure/

    This leads to multiple benefits: infrastructure costs are not in the house cost and passed on at sale, those who build the infrastructure pay for it and the MUD has local planning power and control e.g. put in public amenities such as parks and the like.

    For those that like multi-media:

    http://www.macrobusiness.com.au/2013/04/the-business-abc-tv-tackles-housing-supply/

    “LEITH VAN ONSELEN: One way to do it is to go back to the old-fashioned way that we used to do which is actually raise money through bond financing and recoup it from ratepayers over a period of 30 years. Instead we’re not doing that anymore and we’re frontloading the cost of infrastructure and other taxes onto the sticker price of new homes.

    KRISTIN BROOKFIELD: It shouldn’t be that the one home buyer has to bear the cost of up to $120,000, $140,000 of taxes and charges on that single block of land to pay for infrastructure which serves the whole community.”

    So, in addition to levying a broad land tax which drives down land values, local districts should be levying infrastructure bonds (in addition to liberalizing land supply) in order to drive down housing costs. Removal of demand side distortions like NG and the like would also help greatly.

    These are not the only solutions, but they are a better place to start then with new slick guvvy grants which are simply bait for foolish investors with no clue about what real affordability looks like.

  4. Chris O’Neill06-05-2013

    “Abolish Stamp Duty on ALL property transactions and fund this by removing the Principal Place of Residence exemption from State Land Tax.”

    And that is what the ACT government is planning to do, IIRC. Their plan was that when a property is transferred, the new owner can choose whether to pay the old stamp duty or to switch (irreversibly) to annual land tax. This gives first home owners a huge equity advantage over having to pay stamp duty which comes straight out of their meagre equity. If any state government was REALLY interested in helping first home buyers, this reform would be a no-brainer.

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