Economist Thomas Sowell warns, in Basic Economics, that no matter how well-intentioned, government interventions in the housing market almost invariably result in a short supply and increasing cost. New Zealanders who’ve watched the Ardern government’s spectacularly failed Kiwibuild policy have grim experience of this economic rule. But it’s not just starry-eyed socialists who fail to heed this lesson. Even the supposedly sober economic managers in Australia’s Liberal-National Coalition have been unable to resist meddling with housing policy – with predictable results.
The HomeBuilder scheme has created a two-tier market in Western Australia where the cost of building a home has become greater than the property’s market value in many areas, causing problems for owners trying to source finance.
Property experts warn building in such circumstances could be ‘financial suicide’.
This is a failure on both sides of politics. While the (supposedly) conservative Coalition rules in Canberra, WA is under the watch of the left-wing McGowan Labor government.
In WA, there are two grants which can be applied for; the federal government’s $25,000 HomeBuilder grant and the state government’s $20,000 grant.
Perth-based property forecaster and analyst Gavin Hegney said existing properties in many areas were selling below what it would cost to buy the land and build.
“The free money is really compensation for building the home that costs more than what it’s worth in those areas where property is selling below replacement costs,” he said.
Like Kiwibuild, the program is unable to meet even its own goals.
More than 11,000 home builders and renovators nationally have applied for the HomeBuilder grant to encourage housing activity, new data released by the government on Thursday showed, but so far just 780 have got their hands on the cash.
New home builds make up 8884 of the national applications, with the remaining 2483 applying for rebuilds or renovations.
Hardly surprising, considering that the threshold for renovations is a minimum of $150 000.
While the sudden upswing in building activity from HomeBuilder was good for employment, it was not always easy to deliver on the ground.
“One thing that would benefit the industry would be if the trade shortages we have were able to come into the state from elsewhere to service the demand spike,” Professor Hegney said.
Which isn’t going to happen in a hurry, while McGowan persists with WA’s COVID-panicked hard border closure.
If the surge in activity created an increase in wages, it would be good for the trades but could very quickly erode the profits of builders[…]
Federal Housing Minister Michael Sukkar said in a statement the scheme was providing the necessary stimulus to “get to the other side of the COVID-19 pandemic”. The scheme is forecast to cost taxpayers $688 million.
That’s a massive taxpayer bill to keep an industry afloat in an economic downturn entirely caused by panicked governments.
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