Does the grant affect house prices?

When the Government's first home buyers grant and various state funded benefits come to an end they could force lower end house prices down by up to 10 per cent.

CB Richard Ellis has warned that the figures released by the Australian Bureau of Statistics earlier this week have shown that the number of homes bought by owner occupiers in May was 29 per cent higher than in October, when the federal boost was introduced.

The Australian has reported that first home buyers were responsible for 95.2 per cent of the increase.

CBRE manager of residential research Erin Rolandsen stated that first home buyers have been the cause for this boom and that once the boost is reduced from September it will leave the market rather vulnerable, things would get even worse after the boost is withdrawn at the end of December along with the withdrawal of state funded measures in July next year.

Falls could reach 10 per cent from the peak in some areas, depending on the market conditions.

The CBRE has based their forecast on market analysis from the agency's View Point report.

Since the boost was first introduced, rising house prices have increased the average first home buyer loan by $20,000.

Ray White announced on Wednesday that there had been a 33 per cent increase in June sales this year compared with sales in June last year. Ray White deputy chairman Sam White said total June sales were 2.411 billion, compared with $1.8 billion last year. He predicted investor driven growth for the second half of this year.

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Published on July 7-th, 2009 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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