Loan Market Group is urging the federal government to increase the First Home Owner’s Grant (FHOG) in a bid to bring the incentive in line with current real estate prices.
The grant was originally introduced on July 1 2000, to offset the impact of the GST on home ownership.
Loan Market chief operating Officer Dean Rushton said almost 11 years the one-off payment to eligible first home buyers remained locked at $7,000.
Mr Rushton said the residential real estate landscape had changed significantly in that time and a $7,000 grant was no longer adequate.
“In the last decade we’ve seen property prices almost double in most capital cities, which has effectively halved the value of the grant to prospective first-home buyers,” he said.
“If the government is to deliver an effective FHOG then it needs to be more than $7,000.
“The economics that drove the original payment are outdated and need to be reviewed as per any government grant. For the FHOG to continue to help buyers, it needs to reflect the conditions they face in 2011, not 2000.”
Mr Rushton said first home buyers had dropped out of the market over the past 18 months due to a combination of costs of living, higher interest rates and the challenge of paying high rents and saving for a deposit.
He said the federal government’s $1.2 billion First Home Saver Accounts (FHSA) scheme, which was introduced in October, 2008, had done little to encourage first time buyers.
“The scheme aimed to assist more than 700,000 people within the first four years but it has attracted nowhere near the amount of interest anticipated,” he said.