Plan to give new homebuyers $50,000 to kickstart economy
New-home buyers could pocket a $50,000 handout under a proposal from the property industry's peak body aimed at kickstarting the sector weighed down by the coronavirus pandemic.
The Property Council of Australia has also put forward a radical transformation of housing taxes by abolishing stamp duty and increasing GST as well as a plan to increase the buyer cohort by encouraging immigration.
Chief executive Ken Morrison said the council's seven-point proposal will help secure jobs for hundreds of thousands of Australians and ensure economic recovery post-coronavirus.
"Some big and bold thinking is required to get the Australian economy going again after the impact of the COVID-19 pandemic," he said in a media release.
"As Australia's biggest employer which contributes over 13 per cent of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments."
The council said its plan will improve housing affordability. But REA Group director of economic research Cameron Kusher said similar handouts in the past have consistently driven property prices higher.
"Obviously a $50,000 new home boost would certainly help the development industry and the new development industry is going to have some challenges with the international borders shut over the next little while," he told news.com.au.
"But $50,000 to give to everyone who buys a new home is a lot of money, and we've seen in the past that first homebuyer schemes like that do tend to push up the price of property."
Such incentives usually result in the buyer adding that lump sum on top of what they had set aside for the purchase, meaning prices across the board lift in accordance with the handout amount.
"Once you start giving people those grants, prices start increasing and while that makes people feel wealthier, it may not be what we need economically," Mr Kusher said.
"We should be looking at ways to encourage more transactions and removing stamp duty is one way to do that, and increasing people's borrowing power so they can get into their own home."
The abolition of stamp duty is gaining support among the property community but Mr Kusher said the prevailing issue is the lack of alternative for the massive tax revenue in accumulates.
He said politicians recognise stamp duty creates a genuine hurdle for people entering the housing market but neither side is likely to risk proposing an increase to GST.
"There's awareness it should be removed but even a land tax is going to be difficult because once people realise they're going to have this additional cost of owning a home every year they didn't previously, they're not going to like it.
"But equally, they're not going to like it if we increase GST and the cost of everything goes up."