Changes to First Homers Grant to Affect Prices

If the First Home Owners Boost ends after the June 30 deadline it's likely property prices will be pushed up in the short term, according to new research.
The boost has been responsible for increased activity in the residential property market since it was introduced in October last year.
Research conducted by BIS Shrapnel for QBE LMI shows that if it's extended beyond June 30, first homebuyer demand could peak at 180,000 loans next year.
But if it isn't continued demand for new and established housing will be pulled forward, resulting in short term rises in property prices of five per cent.
The amount of loans taken out by first homebuyers has been on the rise as current conditions provide incentive, including the boost to the grant, rising rents and lower interest rates.
First homebuyers have also typically been borrowing more money, with research showing their average loan size has increased from $264,500 in October last year to $280,600 in February this year.
CEO of QBE LMI Ian Graham warns government incentives alone shouldn't be the main motivation for buying.
"First homebuyers, irrespective of whether the first homeowners grant boost scheme is extended or not, need to ask whether they are buying for the right reasons as a home purchase or mortgage is a long term commitment and they need to be able to service interest rate increases in the future," he says.
"This is particularly important if the boost scheme is not extended beyond June 30, 2009, as this may result in a hasty decision by first homebuyers on their choice and the price they are prepared to pay for their home."