Why HomeBuilder needs to be extended

By Gerv Tacadena | 20 Aug 2020

Master Builders Australia is urging the federal government to extend the HomeBuilder scheme for another year to counter the potential downfall in building activity.

Denita Wawn, CEO of Master Builders Australia, said while the HomeBuilder scheme is considered the "most effective government stimulus measure" in the decade, the federal government needs to include its extension in the pre-budget submission.

In fact, despite the "success" of the scheme so far, Master Builders projections show a 27% fall in homebuilding activity for the financial year 2020-2021.

"This will be calamitous for many of the nearly 370,000 home building businesses that are vital to local economies and communities throughout Australia unless the Government steps in with extension of HomeBuilder and other stimulus measures," Wawn said.

According to Master Builders' model, extending the HomeBuilder scheme for another year will provide a boost to GDP of up to $4.5bn, create more than 4,500 jobs, and build 6,000 new homes.

Also read: What Could Dampen Building Activity?

"The federal government showed its commitment to builders and tradies when it announced HomeBuilder Mark I, and they must be given credit for that. They should now double down to secure to further jobs by including HomeBuilder Mark II in the October budget," she said.

Improvements to the HomeBuilder scheme

While the scheme was able to stir up demand for new homes, some improvements would make it more beneficial, particularly for would-be buyers who are now applying for home loans, according to Paul Bidwell, deputy CEO of Master Builders Queensland.

Bidwell said the current rules are stopping lenders from considering the grant when determining loan eligibility. Buyers are not able to utilise the $25,00 grant as part of their deposit.

"This technicality could mean the grant has no benefit for many new home buyers and can only be utilised by those who can already afford to build without the assistance," he said. "What we don't want to see is signed building contracts falling over when owners fail to secure finance."

In fact, latest figures from the Australian Bureau of Statistics show that there was a 64.6% surge in loan approvals for the purchase residential land. Total housing loan commitments grew by 32%, with owner-occupiers leading the growth.

"The easing of COVID-19 restrictions has also resulted in consumers having renewed confidence not only to visit display homes but move ahead with building work and sign contracts," Bidwell said.

Given that the pandemic is still continuing, Bidwell said it makes sense to extend the grant to maximise its intended benefit not just to the construction industry but also to the economy.

"This will ensure that the cliff face the industry is facing isn't just delayed by six months; it's given more time to do its job," he said.

Push for a CommunityBuilder grant

Wawn said another possible move that the federal government should consider is rolling out a new stimulus measure similar to the HomeBuilder grant but is catered to commercial construction.

For this CommunityBuilder grant, the government needs an investment of $3.8bn to deliver a boost of $6.8bn to the economy and create 13,000 new jobs.

"Commercial construction activity is forecast to slump by 17%. You will not see many cranes in the sky, and it will mean that thousands of businesses are at risk of simply exiting the industry along with the thousands of jobs that they provide," she said.

Wawn said the scheme would involve the federal government providing grants to not-for-profit and local grassroots community organisations to help fund the construction of new facilities or the substantial renovation of existing ones.

Under the proposed scheme, the government could set the parameters at funding 25% of projects costing up to $5m. Similar to the HomeBuilder, the beneficiaries of the grants would need to put up the rest of the money and also receive additional assistance from state and local government.

"HomeBuilder has resulted in home builders having the best months in terms of sales in a decade, and the positive impact on building approvals will be showing up strongly in months to come," Wawn said. "CommunityBuilder would have the same effect and see new or enhanced community centres, libraries, school buildings and sporting facilities."

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