Western Australian State and Federal Building Grants

Prime Minister Scott Morrison announced last weekend a new grant program designed to support the residential construction sector. Coined “HomeBuilder”, obviously brought to you by the same imaginative namers of JobKeeper and JobSeeker, the program is designed to encourage home owner-occupiers to undertake a new home build or substantial renovations by gifting them $25,000.

There’s a few rules to follow to get the $25k, but based upon the massive spike in Google search term ‘home renovation’ across Australia this week, it seems many of us are keen to take advantage of the offer.

To qualify, individuals can’t earn more than $125,000 p.a, couples no more than $200,000, the build or renovation must be your home and the value can’t be more than $750,000 if building and less than $150,000 if renovating. Importantly, buyers who acquire land after the 4th June can’t get the grant if the combined value of the land and building exceeds $750,000.

The trickiest part is applicants need to sign a building contract between the 4th June and 31st December this year and commence works within three months after the date of the contract. For larger projects, that will be a push, especially given the notoriously slow approval processes at local government planning departments and their councils.

Not to be outdone, Premier Mark McGowan announced a further stimulus a day later, offering up $20,000 to anyone who wants to build. The rules around this one are simple; anyone qualifies, including investors and those who build multiple houses.

The grants really are focused on cookie-cutter house and land packages in the outer ‘burbs where youngsters have plentiful choice of lots and display homes to look at. First home buyers are the big winners whereby they can buy land for less than $300,000, pay no stamp duty, take advantage of the Federal mortgage insurance underwriter program, get the $10,000 first home buyer grant, claim the $25,000 from the feds is they get a wriggle on and get $20,000 from the Premier – up to $69,000 is the maximum possible benefit.

This is serious incentive money and its already being taken up in droves much to the delight of the big land developers and builders who’ll benefit the most. The buyers themselves not so much. Sure, they’ll get a nice 4 x 2, double garage and theatre room but, if history provides some lessons here, the day it’s finished its value will be far less than the combined cost of the house and land including accounting for the grants. Think Baldivis and Alkimos; established property values in these places remain at 2004 levels thanks largely to oversupply of new stock through grants programs.

There is little doubt these grants do prop up the construction industry by protecting jobs, but those retched folk that built their homes five years ago in emerging suburbs will see their home values drop significantly as a result.

People go nuts over free government money but the lessons our mums taught us about ‘no free lunches’ ring true. These ‘grant-built’ homes could take at least ten years to recoup their combined value for their owners, keeping them stuck in the ‘burbs for the next decade unable to shake off the scourge of negative equity.