Will house prices rise in line with the First Home Owners Grant rises.

Those of us who have lived through two, now three first home buyers incentive schemes know two things that most people don't. The first is that putting money into first home buyers pockets is like spraying petrol into a car engine. When the fire is burning you will get a massive acceleration, more maybe than the energy you put in. When you do the same to a sluggish or dead engine, you will flood the engine and kill the spark.
The first home buyers have spoken in their silence. The engine is dead, and its flooded.
It needs to be stripped down and over-hauled. Its sick and doesn't do the job it was intended to do.
Adding supply side demand [by giving incentives and cash to potential first home buyers to an inefficient/ housing market] may drive the market on, but it will not address the core issues.
The core issues are that banks put their self interest before their customers and won't pass on rate rises, and must be dragged kicking and screaming to do so, and that the new home market is geared to second and third home markets, and in doing so has become inefficient in building new home stock.
The result is that the average age of a first home buyer is nearly forty in Australia, [over forty in the US], and the home builders of Australia and America focus on where the money is, the second, third and fourth home buyer.
These people want to get it right, mostly for a couple and a dog, and take their time to design and decide, two reasons why we are building bigger and bigger homes for less and less people.
I have worked in the new home building industry in the 1980's, the 1990's and the 2000's up to right now.
The last month I was AV Jennings in the mid 1988's I sold 7 homes [I averaged 4 homes a month.] The average was 3 sales a month in the 1980's
The average for the 1990's was 2 sales a month for the industry.
By 2000, the average was 1.5 home sales a month per new home sales.
By 2008 this was 1.25 home sales a month per month and falling fast. Many builders have display homes where they can't get home sales consultants to work or they have decided not to open because of their "graveyard status". Many builders have display homes they can't sell.
The sales training given these days is better than in the 1980's and the sales people are more professional, and the urgent need for accommodation for families is dire. So why aren't homes being built?
There are many reasons, but the big one is that first home buyers want a home three times the size they need and twice the size they can afford, and State and local Governments are addicted to money they take in the form of fees and Stamp duty from land developers, home builders and their suppliers, and home buyers generally and new home buyers in particular.
This makes the homes that first home buyers are looking at, at least $100,000 more than they would be, and paying off a mortgage that is $100,000 bigger than it should be may get the banks rubbing their hands, but is making first home buyers reluctant to get into debt that deep for a dream that can become a nightmare in an unclear future.
We need to stop allowing Local councils and state governments dependent on bleeding new development and building projects.
So back to the original question.
Will the house prices rise by the size of the grant increase?
I don't think so. Not this time. In the 1970's it did because The new home builders have become niche suppliers to second, third and fourth home buyers, not first home buyers. The incentives are still too small and don't compensate buyers for the GST, let alone the ripoffs mentioned.
Land supply to Developers needs to be controlled by the Government, as developers and builders have not been meeting the markets needs for years, and land developers use deceptive marketing tactics that manipulate the markets and make land prices artificially high, under the guise of market forces. They buy raw land then hold it. They should be taxed out of doing this. They deliberately hold land from sale to give the appearance of scarcity, when land is in fact abundant. They tell customers that they only have three lots available when they have 15 or 50 available. The run sham auctions. They put sold signs on lots that are not sold.
If Governments acquired and banked residential land and created a competitive development industry first home buyers could see a new home price halved.
The truth is a block of dirt to build a home on should not have to cost $300,000 in the middle of nowhere, but it does on the Gold Coast, and in many areas of Australia.
It time for a breakout of the trend that has gripped Australian residential building and it time for a new deal for the smarter first home buyers that want that new deal.
First home buyers no longer want to get across the line, because they are smart enough to know that they are then the proud owners of a 30 year mortgage. That the mortgage is bigger than it should be should be concern for everyone.
Rick Adlam is the founder of the Australian Mortgage Exchange and Mr Mortgage