Opinions differ amongst housing industry bodies as to the potential effectiveness of the State Goverment’s ‘Building Boost Grant’ in boosting the struggling building industry and housing market.
In its budget this week, the Queensland Government announced a $10,000 grant for any person or corporation buying or building a new home in Queensland with a value less than $600,000. The grant will be available for homes purchased from 1 August 2011 to 31 January 2012. The grant was counter-balanced to a degree by a further announcement that the current transfer duty concessions for owner-occupier buyers would cease from 1 August. Concessions and grants for first home buyers will remain unchanged.
The Queensland Master Builders Association has released a statement welcoming the announcement saying this is a ‘kick start measure desperately needed by Queensland’s building and construction industry’.
The REIQ on the other hand is very concerned that the removal of the stamp duty concession will flatten the already struggling Queensland residential property market. In her press release, REIQ chairman, Pamela Bennett said while any incentive to increase housing supply and create jobs in the construction sector is a positive for the economy, the removal of the stamp duty concession for non-first home buyers will wreak havoc on the Queensland property market.
“A better way to stimulate the economy would have been to provide financial incentives for all buyers of all types of properties which in turn would have increased activity and therefore helped the government’s bottom line,” Ms Bennett said.
Whilst welcoming the boost, some builders are concerned that they will be virtually shut down for six weeks until the grant takes effect on 1 August. The Courier Mail today reported on several major builders finding buyers were pulling out of deals or deferring signing contracts.
In its own budget releases, the government has highlighted a key issue for all home buyers in that they should “carefully consider the available grants and the changes to transfer duty rates…to help… make an informed decision about the timing of the purchase.”
What are the real impacts on different buyer types across a range of new home values? We have looked a number of scenarios.
Investors already pay the maximun stamp duty rate. From 1 August, they will benefit from the $10,000 grant. The change in the cut-off points for the rate changes also means a further $600 saving in transfer duty up to a value of $480,000. These buyers may well consider delaying their purchase if a reasonable choice of properties remains available.
If purchasing a new house or apartment, owner-occupier buyers will benefit from the $10,000 grant. However, they will be paying almost 60% more in stamp duty for a $600,000 property and up to 260% more for a $300,000 home. At $300,000, the net benefit will be $4,675. At just under the $600,000 cut-off, the net benefit would be $2,825. One might argue that in both cases, the delay may not be worthwhile if it means missing out on a desired property.
For owner occupiers about to enter into a building contract, stamp duty will have no impact, so there is a $10,000 incentive to delay signing the contract. The flaw in this argument is that in many areas, land is in short supply. Savvy buyers will know that they will certainly risk losing their block of choice and also risk incurring extra building costs by delaying.
First Home Buyers:
This group stands to qualify for a whopping $17,000 grant from 1 August. For more well to do first home buyers, they will pay an extra $7,000 in stamp duty near the grant limit of $600,000 which will bring the benefit back to a still attractive $10,000.
As with owner-occupiers, this group will also benefit from building, but face the same dilemma with securing suitable land in a tight marketplace in many areas.
You will find more information on the budget initiatives on the State Budget website.