Monday, April 13, 2009

Encouraging home ownership during a recession 2

There is concern in some quarters regarding government incentives to encourage home ownership during a recession. I have posted on this previously.

Bank gamble on first homes, by Eric Johnston, April 12, 2009, The Age ...New loans issued to first-home buyers rose 15.9 per cent in February compared with a year ago, to a record 14,484, according to figures released last week by the Australian Bureau of Statistics. The number of loans to owner-occupiers rose 0.4 per cent in February — the fifth consecutive increase in lending activity, with first-home buyers driving growth...

In October, the first-home owners grant was doubled to $14,000 for existing homes and $21,000 for new dwellings. At $21,000 this represents about 6 per cent of the average first-home buyer dwelling price....

Banks insist the boom in firsthome buyer grants does not represent increased risk. Banks do not count the first-home grant as part of the deposit while loan to valuation ratios — that measure the level of debt compared to the asset — are being reduced....

JPMorgan analyst Scott Manning believes first-home buyers are borrowing too much at high initial loan-to-valuation ratios at artificially low interest rates."(This) will ensure that Australian households remain highly geared and highly sensitive to any future increase in interest rates," he said.

Mr Manning said that despite housing prices being relatively flat in the past year, the first-home buyers' average loan size had increased 14 per cent to $283,000.


  1. This article is very timely and relevant. As I quote Cameron Muir, an economist, "Home sales are unlikely to fall much further..That being said we expect home sales not to decline much further."

    But it's never too late, with the right business plan set up, it will lead to valuable outcome. This is what most counselors would give as an advise.

  2. the govt is controlled by the banking families who own the large banks and provide the mortgages. They want to continue to push their mortgages on everyone, knowing the people will not be able to pay, then the bank will foreclose on the homes and steal everything from the people.

  3. I honestly they want to encourage home ownership so when the economy crashes, the banks can then reclaim the real estate.

  4. I don't think encouraging home ownership when the economy is doing so bad is a good idea. Not good.

  5. Too many people are unemployed in the U.S. John Williams of Shadowstats says we are headed for a great collapse.

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