Buyers urged to act as stimulus makes instant impact

State and federal government stimulus packages are making an immediate impact on demand for new houses, particularly in the more affordable states, with prospective buyers urged to act quickly to ensure they can take advantage.

For most of 2020, real estate agent Luke Trolio says there has been little interest from buyers looking for vacant land in Perth’s established suburbs.

With Western Australia’s new home building sector stagnating, Mr Trolio said just 10 to 15 per cent of enquiries to his Harcourts Realty Plus agency were for vacant land, with most coming from builders seeking plots to market house and land packages.

But that all changed within the space of a week, after the federal government’s HomeBuilder grants and the Western Australian state government’s Building Boost package completely flipped the market.

The grants are particularly enticing for first homebuyers, who, if they meet certain eligibility criteria, can access government grants and rebates totalling between $40,000 and just over $70,000, depending on their location.

Mr Trolio said he had experienced significant challenges while marketing a boutique eight-lot townhouse development in the Perth suburb of Spearwood on behalf of developer Property Consultants Australia, with buyers uninterested for the better part of a year.

Following Premier Mark McGowan’s weekend announcement of $20,000 grants, available to anyone willing to build a new house, Mr Trolio said enquiry had “gone ballistic”.

Two buyers requested sales contracts for lots at the Spearwood project on the first morning following the announcement, Mr Trolio said, while another 10 parties had made enquiries for more information.

“Immediate is absolutely the word to describe it, it’s just through the roof at the moment,” Mr Trolio told Australian Property Investor Magazine. 

“It’s hard to keep up, because the people who were sitting on the fence the last week or the week before, they are obviously committed now because there are big incentives available.”

Mr Trolio said the enquiry from builders had also shifted following the stimulus announcements.

“Now it’s actually builders saying ‘send me the contracts, I have someone ready to go’,” he said.

“The proportion of land enquiries has increased, but it’s more genuine now. Rather than builders just shopping around, it is very specific.”

Mr Trolio’s experience is not unique, according to the executive general manager of WA’s biggest builder, BGC Housing Group’s Michael Bartier.

Mr Bartier said BGC had experienced a large spike in enquiries and demand across its homebuilder brands, which include Go Homes, Aussie Living Homes and Commodore Homes, among others.

“This spike was evident across all of our brands/divisions and has not been limited to just first homebuyers,” Mr Bartier said.

“With many consumers having delayed their purchasing decision as a result of the uncertainty of COVID-19, the move by both governments has given reassurance to the industry.”

ABN Group managing director Dale Alcock provided a similar testimony, saying that momentum began building following the HomeBuilder announcement last week, and picked up strongly following unveiling of the WA Building Boost.

Mr Alcock said the stimulus packages had “brought a lot of enquiry out of the woodwork”, with many prospective buyers asking what grants or rebates they would qualify for, and whether they would qualify for both the federal and state government schemes.

“I’m very pleased this has had that immediate strong, positive reaction and we believe already that enquiries are turning into leads and we are very confident it’s going to result in an immediate, positive impact for sales,” Mr Alcock told Australian Property Investor Magazine.

“I’m actually putting it out there to mums and dads, saying a bit tongue in cheek ‘if your adult kids are still at home and they’ve got a job, this is your perfect opportunity to turf them out’. 

“It’s good for you as parents because you can get rid of them, and it’s good for them as well because they can get the aussie dream of owning their own home, and they can increase their payments for the next couple of years and get some serious equity in the home.”

Mr Alcock said, however, he expected challenges in coming months as the stimulus packages are received and building activity increases significantly.

With Western Australia coming out of a five-year housing downturn, Mr Alcock said he expected titled lots to be snapped up very quickly, with pre-sold land possibly putting the squeeze on the tight time frames in place for homebuyers to receive the grants. 

“There are six months from contract signing to site start for the WA scheme and only three months for the federal scheme, so we are going to work locally to try and get alignment on that,” he said. 

“I think we need six months for both.”

The other challenge would be the availability of tradespeople, with the number of skilled workers in the industry well down on the previous peak of the market.

“We have 80 apprentices in training, we want to go out and put more on and we’re certainly going to look to take up more staff to cope with the demand, and increase our trade base as well

“We may have to look at training people coming out of other industries that might have been impacted negatively.

“Then we need to keep a bit of an eye on the opportunity of skilled migration as well. After five years of downturn, we just don’t have the same capacity in our industry, so we’re going to need some help on that as well. 

“Overseas migration is going to be a bit of a dirty word in Australia while there is unemployment, but we are going to need a reasonable level of skilled migration and that will hopefully grow housing demand for the future.”

While Western Australia is well positioned for buyers to take advantage of the stimulus due to its relative affordability compared to other states, it is not the only Australian state where enquiry for new homes is starting to skyrocket.

Mr Alcock said demand at ABN Group's Victorian operations had increased, but not at the same level as it had in WA due to the additional stimulus on offer and the west coast capital's relative affordability as compared to Melbourne.

Real Estate Institute of Australia data for the March quarter showed Perth and Adelaide had median house prices of $480,000, making them the most affordable capital cities in Australia other than Darwin, which has a median of $470,000.

Even without a state government stimulus package to add to the federal government’s $25,000 HomeBuilder grant, buyer demand is quickly rising in the South Australian capital.

Adelaide-based property marketing and property development consultant Chris Ikon, who represents developer and construction firm Buildtec Group, said the federal cash on offer had been a significant catalyst to stoke buyer demand.

“For people that were sitting on the fence and were ready to go, this will help tip them over the edge,” Mr Ikon told Australian Property Investor Magazine.

“People that had pre-approvals in place before COVID don’t want that pre-approval to lapse so they are rushing to market.

“First homebuyers are obviously really in the market too, and we’ve seen a lot of parents helping out as guarantors or providing deposits.”

Mr Ikon said, however, that the announcement of the grants was not a simple pathway for anyone to be able to build a new home.

“There are a lot of criteria to be met, with contracts to be signed before the end of the year and construction to start within three months of signing, so the fine print may catch a few people out,” he said.

“The grants have stimulated activity but people still need to go through the finance process.

"It’s not a case of simply getting a grant and going and building a house, you still need to have a job and apply and qualify for a loan.”

On the eastern seaboard, Simonds Group joint chief executive Kelvin Ryan said he had never seen enquiry hotter at the ASX-listed builder, which has operations in Victoria, Queensland, New South Wales and South Australia.

Mr Ryan said digital enquiries nearly quadrupled after Prime Minister Scott Morrison’s HomeBuilder announcement, with demand particularly strong in Victoria.

He said the stimulus was working well in most states, but Sydney buyers would likely miss out due to the strict eligibility criteria in place for building on a vacant lot.

HomeBuilder eligibility criteria includes a $750,000 cap on the value of the house and land, as well as income limits of $200,000 per year for couples.

And while Mr Ryan said HomeBuilder overall was a very good initiative, he said there would likely need to be further measures taken by state and federal governments once the scheme is phased out early next year.

“The industry was saying that the market was going to fall off in September-October, so they have tailored something very much to start building houses in September-October,” he said.

“We are in a bit of a triage environment - this is the emergency action that needed to be taken to buy some time to deal with the other patients. 

“This is just a shot in the arm, an emergency measure, in my view anyway, to stop the industry falling off a cliff in the last quarter of this calendar year.

“By definition, you have to start within three months of signing a contract, so by definition it can only help the industry up until March next year.”

Mr Ryan said he believed the homebuilding industry had been so damaged by COVID-19, as well as usual economic cycles, that a longer sustaining stimulus would likely be needed next year.

He said one of the misconceptions of the federal government’s HomeBuilder packages, which has come under fire for being too restrictive in terms of home values and salary caps, was that it was designed to get people into their own home.

“This is a demand-stimulating initiative,” Mr Ryan said.

“It still requires someone to make a choice to buy a home, but it drives demand. 

“Real stimulus would be supply initiatives, like the government starting to build social housing. That will save the industry.

“Quite often, first homebuyer grants are to help people achieve the great Australian dream of owning their own home. 

“HomeBuilder is 100 per cent about keeping people employed. It’s a totally different basis by which they’ve engaged in it.”