New home grant to be cut

HOPES of an extension to the $10,000 first-home buyers grant for new housing will be dashed in the May 14 Federal Budget.

The Government will press ahead with plans to reduce the grant for those building a house to $7000 from July 1 this year.

This will make the grant equal to the amount offered to first-home buyers purchasing an established home. It gives those who plan to build just over two months to claim the extra $3000.

The latest revelation quashes recent reports the Government has been considering an extension to the $2 billion scheme.

Despite strong lobbying, the home building industry has been unable to convince Prime Minister John Howard's office to extend his assistance.

The Housing Industry Association had urged the Government to maintain the difference in the two grants to stave off another slump this year.

The HIA argued that reducing the new home grant would see first-home buyers switch to existing homes just as builders' orders began to dry up.

But one insider said the Government believed continued low interest rates would sustain the housing industry.

He said there was also still a lot of building work in the pipeline.

With the Government working with a slim surplus, the projected multi-million cost of an extension was seen as excessive.

Last March, the grant was doubled to $14,000 for new homes to guard the economy from a deep building slump.

Last December, the grant was reduced to $10,000 and extended for six months.

As of February 20, more than $520 million had been issued in grants for both new and established homes to 65,000 Victorian first-home buyers.

HIA's executive director of policy and public affairs, Ruth Morschel, said the association had given the Government a revenue-neutral assistance

option in a last ditch bid for help.

"We are still in there lobbying on the merits in maintaining a differential between the two grants," she said.

Ms Morschel would not comment on HIA's revenue - neutral proposal, but it is believed to involve reducing the grant for existing homes.

Existing homes now account for 25 per cent of grants awarded.

But the HIA is concerned that with both grants equal, the share of first home buyers choosing to build will fall to 7 per cent.

A spokesman for Mr Howard said he was unable to comment on the contents of the Budget.

Source: The Melbourne Herald Sun Newspaper, April 22 2002
Author: Rick Wallace