Kathryn Lee - 2 Oct, 2020

Has the HomeBuilder scheme improved housing sales?

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Launched on 4 June 2020, the Morrison government’s $25,000 HomeBuilder program was introduced in a bid to help combat the COVID-19 induced construction lull predicted for the second half of 2020.

Four-months on, it appears the scheme was in part a success – and certainly had an impact on sales – though according to Treasury analysis the $680 million scheme’s true impact on jobs might have been exaggerated.

New analysis has predicted the HomeBuilder stimulus package will create an extra 9,600 jobs for the construction industry, which had previously been projected to enter a lull during the second half of 2020 when construction contracts dried up due to the pandemic’s economic hold.

While the job creation is positive, the figures fail to meet the government’s previous claims that the scheme would support hundreds of thousands of workers.

“HomeBuilder will help to support the 140,000 direct jobs and another 1,000,000 related jobs in the residential construction sector including businesses and sole-trader builders, contractors, property developers, construction materials manufacturers, engineers, designers and architects,” said Prime Minister Scott Morrison when announcing the program in June.

However, despite this analysis the Housing Industry Association (HIA) believes the new figures underestimate the scheme’s value.

“With a workforce of around 4 full-time workers per project, the program will support over 110,000 workers, not including the workforce engaged in manufacturing, retailing and supply the products, materials, fixtures and fittings that go into building a new home,” HIA managing director Graham Wolfe told Business Insider Australia.

Aerial view of houses in an Australian suburb

New home sales jump

HIA new home sales data for August showed sales surge in the three months following the announcement of HomeBuilder, rising 61.3% on the results of the previous quarter.

HIA Chief Economist Tim Reardon said the data showed promising signs for the upcoming December quarter, also saying the HomeBuilder scheme had played a large role.

“The improvement in the number of New Home Sales over the most recent three months will see a lift in the number of homes under construction in the December quarter, compared to what would have been the case without HomeBuilder and the stimulus measures implemented at the state level,” said HIA chief economist Tim Reardon in the report.

However, despite the strong result the report also noted sales had not been consistent across all states.

Western Australia has proved to be a strong performer, where new sales are 91.1% higher in the six months to August 2020 than at the same time the previous year.

“New Home Sales in WA have improved markedly over the last three months and the strong numbers have more than made up for the weak results between March and May,” said Mr Reardon.

“… The combined impact of HomeBuilder, the WA State Government’s Building Bonus and pent-up demand for housing will see home building pull the WA economy forward. The surge in home building work from as early as the December quarter will see more skilled workers return to WA pursuing employment opportunities which will also underpin demand for this new housing stock.”

On the other side of the country, Queensland also saw a sales increase, albeit by not as much. New house sales were up 4.2% in the six months to August 2020 compared to the same period last year.

Feeling the brunt of pandemic hardship, it was a different story in Victoria. Here, new home sales were down 12.0% in the six months from March to August 2020 than in the 2019 period.

“Victoria experienced a significant decline in sales in the month of August, down by 14.4% for the month. The restrictions on travel and trade during the month of August have clearly impacted sales,” said Mr Reardon.

In the six-month period to August 2020, New South Wales and South Australia also experienced a drop. New South Wales saw sales decrease by 0.1% whereas South Australia had an 8.6% decline, compared to the same period last year.

“New home sales were static or lower for the past 6 months in Victoria, New South Sales, and South Australia as the pickup in sales due to HomeBuilder have not offset the losses due to the COVID recession. A sharp contraction in sales in Victoria for the month of August is due to the stage 4 restrictions and the closure of display centres,” Mr Reardon told Australian Broker.

Scheme approvals

After a slow start, applications for the Commonwealth HomeBuilder grant are now open in all states and territories, though approvals appear to be scarce.

Initiated by the Federal Government but given to the states to administer, the scheme was only recently opened in all jurisdictions, with most populous states New South Wales and Victoria among the slowest to react.

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An update on application progress was last given in early-August, where the Treasury revealed to the COVID-19 select committee that only 247 applications had been received, though some states had been yet to report numbers.

“As of 7 August, South Australia had received 157 applications, Tasmania had received, by the 4 August, 90 applications, and those are [all] the applications that have been received to date,” Jenny Wilkinson, Treasury’s fiscal group deputy secretary, told the committee.

Applications for the scheme are due by 31 December, with construction required to commence within three months of the contract date.

Fiona Nield, HIA executive director for Victoria said restrictions were preventing many Victorians from accessing the scheme altogether.

“To be eligible for the grant, home buyers need to sign a home building contract by 31 December. Even after home buyers are able to visit display suites and choose their builder, there will be limited time to complete the detailed design requirements before this deadline,” she told Your Investment Property.

Buyer beware house and land packages

Due to the specifics of the approval process, where applicants are required to have already commenced the build, experts are warning first home buyers to be wary of housing packages involving unregistered land.

Dream Design Property founder and buyer’s agent Zaki Ameer told Domain he had seen cheap house packages with unregistered land marketed to buyers of late, warning that it can often take 12 to 18 months for a council to register land and for the developers to transfer the title to the owner and begin building.

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“These first-home buyers aren’t aware … [they] know it’s cheap and [think] the property will register by the year; they still think everything is going to be OK. They just see it from a price perspective,” he said.

“They won’t know the consequences until next year.”

Coutts Legal conveyancer and property manager Carina Ferguson agreed, telling Domain that when buying unregistered land there were no guarantees as to when construction could commence.

“When a block of land is unregistered, while there are approximate times given to prospective purchasers, there is no guarantee that their unregistered land will register within that approximate timeframe,” she said.

“If you really want to cover yourself, firstly you should be entering into a registered land contract…”

Ms Ferguson recommends buyers ask their builder to have the start date written into the contract in order to improve chances of qualifying for the grant.

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Words by Kathryn Lee


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