First home buyers 'propping up prices'
March 26, 2009
Strong activity among Australian first home buyers, due to an increase in government grants and low interest rates, is propping up housing prices across the country, Brickworks managing director Lindsay Partridge says.
"The first home buyers grant has underpinned housing values," Mr Lindsay told AAP after his company reported its first-half earnings on Thursday.
"The first home buyers are sucking up anything they can.
"There's no way we'll have the problems they had in the US caused by the falling property values."
Australian house prices have declined by around four per cent since peaking in March 2008, compared with falls of around 10 to 25 per cent in the US and almost 20 per cent in the United Kingdom, the Reserve Bank of Australia said on Thursday in its Financial Stability Review.
While falls in local house prices could occur, it was unlikely the sector would have similar declines as in the US, the RBA said.
To bolster the housing market, the government increased the first home buyers grant in October to $14,000 for existing homes, and $21,000 for newly built homes.
First home buyers have also been encouraged by the RBA, which cut the cash rate by 400 basis points since September from a six-year high of 7.25 per cent to a 45-year low of 3.25 per cent.
Brickworks, Australia's biggest brick and tile producer, reported that earnings before interest and tax at its building products division fell 35 per cent to $16.4 million while earnings at the land and development division more than halved to $12.1 million.
Profit excluding one-off items at the Sydney-based company still rose 26 per cent to $50.8 million because of investment gains.
Mr Partridge said the prospects for his company were likely to improve as construction caught up with the demand from first home owners, and as the government spends $14.7 billion to improve school infrastructure over the longer term and builds social and defence housing.
"I think the market is underestimating the government stimulus for schools," Mr Partridge said.
"We've had tenders already for that."
Mr Partridge said investors were still not buying new properties, which was a good thing, as it would allow growth to be slower and more sustainable.
"We don't want everything to happen at once, causing trade costs to go through the roof and inflation increasing," he said.
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