Economist Steve Keen has delivered a damning verdict on the impact of first-home owner grants, saying they only serve to drive up property prices and push first-home owners out of the property market.
The embattled economics professor and columnist, currently in a legal dispute with his academic institution the University of Western Sydney, says the new doubled $15,000 first-home owner grants being offered by the NSW and Queensland state governments – labelled builders’ grant by Ray White boss Brian White – aren’t as damaging as the previous broader grant to buyers of existing properties.
Keen labelled the recent accusation levelled by acting NSW opposition leader Linda Burney that Premier Barry O’Farrell had abandoned first-home buyers by cutting the grant for existing home and removing stamp duty concessions (unless you buy or build a new home) as “bollocks”.
“First-home buyers weren’t locked out by the ending of the first home vendors’ grant: they were locked out by the impossibly high prices that this grant has helped generate over the 30 years since it was first invented,” says Keen.
Keen says former prime minister Kevin Rudd’s doubling and tripling of the first-home owner grant from 2008 to 2010 caused the last spike in house prices, with the real beneficiaries those vendors who sold their first homes to first-home buyers – hence why
Keen calls it the “‘first-home vendors’ grant” – and the banks that took the extra deposit and heaped first-home buyers with “initially three and ultimately over 10 times as much more debt”.
“The grant should be abolished, and governments should keep their hands out of asset markets.
“The O’Farrell government is still in there with its grant to purchasers of new properties, but that isn’t as damaging as the broader grant to buyers of existing properties as well.
“In that sense, I applaud the O’Farrell government for limiting the damage done to first-home buyers – and indeed the economy – by the grant,” he says in a column for Business Spectator.
Keen says the purpose of the first-home owners grant has never been to give first home buyers a helping hand, but has “always been used as a way of giving the economy the economic equivalent of a steroid injection”.
“First-home buyers have instead been the sacrificial lambs of an asset-price-inflation route to apparent national prosperity,” says Keen.
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