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Raise grant for first time buyers, says report

Raise grant for first time buyers, says report

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Date Published : Wednesday, June 18, 2008

The First Home Owners Grant (FHOG) should be increased in order to stimulate the supply of new properties and help young Australians secure their first house, a senate report has said.

The Senate Select Committee on Housing Affordability said there is a "significant problem" with housing affordability in Australia, with average property values now standing at over seven times the average wage, news.com.au states.

Because of rising prices, the relative value of the $7,000 FHOG has decreased and it now accounts for less than two per cent of the price of a new property.

Furthermore, the committee heard evidence that the grant is actually helping to push the cost of housing upwards because it increases demand for homes from first-time buyers.

The committee therefore recommended that the grant be increased for new properties only in the hope that this will encourage developers to build more homes.

According to the committee's report: "The FHOG would contribute more to improving housing affordability if it provided an incentive to increase the supply of houses rather than just increasing the demand for them."

Other recommendations in the report include imposing a requirement for affordable housing in all new developments, giving states the option of exempting first-time buyers from paying stamp duty and introducing a financial counselling service for homeowners before they pay their mortgage using superannuation.

In related news, the Sydney Morning Herald states that according to the new BIS Shrapnel Residential Property Prospects report, credit conditions are expected to recover during 2009, meaning banks could gradually lower the rates of their home loans for customers.

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