Property Recovery In Bank' Hands

As the First Home Owners’ boost starts to phase out, First National Real Estate says the banks will determine whether the current property market revival will be sustained for any length of time.

“We expect there to be a drop off in first home buyer activity once the Federal Government initiatives come to an end,” Paul Taylor, Taylor’s First National said.

“But, there is also the potential for the middle market, which is already showing encouraging signs of recovery, to be reignited, effectively making up any drop off.

“With prices stabilising and consumer confidence high, the only thing that could stop the recovery continuing and strengthening, would be the banks increasing their variable rates either with, or ahead of, the Reserve Bank increasing their rates.”

In August, banks were quick to raise the fixed rates ahead of the Reserve Bank’s announcement it would hold interest rates until at least early in 2010. But as pressure mounts on governments to rein in their support of the banks, there is speculation the banks will increase their rates early to offset any potentially negative impact from this move.

Paul said if first home buyers stop buying, there is potential for the emerging property recovery to stop or even reverse unless other market segments are stimulated.

“There are signs throughout our network that second and third home buyers, including investors, are taking advantage of current conditions, helping push prices up as they go,” Paul said.

“But, the threat of rising interest rates may impact on this promising trend.”

Since the grant and boost were introduced in September last year, more than 59,000 Australians have taken advantage of the highest levels of housing affordability, since 2002.

For eligible first home buyers entering into contracts between 1 October 2009 and 31 December 2009, the first home buyers boost will be reduced from $14,000 for existing homes and $21,000 for new properties to $3,500 and $7,000 respectively.

“However, state-based initiatives and assistance packages are still available for home buyers and we would encourage purchasers to seek the services of a reputable agent to help them maximise any assistance available through these state-based schemes.  It is also important to talk to as many lenders as possible, to show the banks that they cannot take home owners for granted,” Paul said.