THE FACTS

In May 2009, 4946 Victorian applications to the Federal Government’s first-home buyer’s scheme were submitted, making it the biggest month in the history of the scheme.

The second biggest month for Victorian applications was in October 2001, when 4569 applications were submitted.

Since July 2000, people buying a house for the first time have been eligible to receive a $7000 grant from the government.

This amount was temporarily tripled to $21,000 in the Rudd Government’s economic stimulus package, announced in October 2008.

The success of the scheme in May has been seen by some as a reaction to speculation that the government grant will be halved in coming months.

In addition, some economists have predicted that the Reserve Bank of Australia’s recent trend of cutting interest rates is due to stop.

Commercial banks in Australia have also indicated that they will most likely be increasing interest rates in the near future.

THE VIEWS

Professor Julian Disney, chair of the Rudd Government’s advisory committee on housing affordability, as quoted in the Sydney Morning Herald:

“I don’t think there’s much room for doubt that the [extension of the first-home owners] policy has led to prices being significantly higher than they would have been… That isn’t necessarily bad, it’s a question of degree – by how much and for how long? It may have been a necessary step for a short-term outlook but we have to make sure it doesn’t go on for too long and I think it should have been wound up more quickly.”

Jessica Irvine, economics writer for the Sydney Morning Herald:

“The Rudd Government’s boost to the first-home owners grant stirred up many old wives’ tales that have sustained the great Australian dream of home ownership. It’s time to dismiss a few of them.

Across the country, baby boomer parents whisper in the ears of their progeny that now is the time to buy. They warn: “You’ll never get in if you don’t.” They say: “You’re better off paying off your own mortgage than your landlord’s.” For those not yet convinced, they resort to the old catchcry: “Rent money is dead money.”

What they forget is that average house prices are now seven times the average annual salary, up from about three times when the boomers first bought in. They forget, too, that in the months since the temporary boost to the first-home owners grant – $7000 for established homes and $14,000 for new ones – house prices in the sub-$500,000 category have ballooned.”

BREAKING IT DOWN

A) The first-home buyers grant represents an opportunity, but it cannot be blindly used.

First-home owners need to make sure they are paying the appropriate price for a house, and not an inflated price.

B) Ensuring low interest rates is equally important as the first-home owners grant.

People with mortgages want stability in terms of their interest repayments, and they want them as low as possible.

WHAT’S YOUR OPINION?

Is the first-home owners grant scheme a success?

Has the Australian Labor Party delivered on its promise to improve housing affordability?

Is there an alternative measure that could be taken to help first-home owners?

Should the first-home owners scheme be extended?