Interest in New Homes on the Up

It looks like the Federal government's increase of the first home owner's grant for purchasers of new homes or home and land packages is translating to increased interest at land sales offices and display homes.

Many builders at the lower end of the market have reported an increase of visitors by as much as 30% since the the government announced the increase of the grant to $21,000 on the 14 October. The increase was announced as part of the $10 billion fiscal stimulus package and applies until 30 June 2009.

This incentive which is an extra $14,000 over the existing first home buyer's grant, combined with rapidly decreasing mortgage interest rates appear to be sparking the interest of buyers who, until recently felt priced out of the market.

Display Home, Australia

It seems likely that in the fast growing state of Queensland and Western Australia these measures may work especially as rents are still hard, and rental availability still tight. What landlords could see over the next 6 months though is a weakening in demand as tenants become owners themselves.

On the other hand if the resource industry catches cold, that is if China stops buying, then boom will turn to bust very, very quickly. Both Queensland and particularly Western Australia absolutely depend on the revenues from the mining industry. The ripple effect through the economy will be quick and nasty as commodity prices fall they will take the value of all resource based companies with them.

Raising money is already difficult for smaller exploration firms with the sub-prime fallout and many investors either having no cash or investing in the bargains to be had in under-valued companies with proven resources and significant cash reserves.

These companies will start to move quickly to divest themselves of day-to-day expenses which means the immediate cut to drilling programs which in turn will put sub-contractors and assay labs either out of business or at least holding a whole lot of bad debts. The contractor end of the market is already reporting cancelled jobs and empty order books.

If on the other hand confidence returns to local investment and the commodity prices return then the good times will return. At the moment though they are definitely on hold and I actually think it would be a brave first home owner who made that size of financial commitment on the back of a "secure" job. There are precious few of those in mining boom states: well-paid yes, secure no.