Briefly:
Ahead of the Northern Territory election, the Rural Liberals and Labor have promised Australia’s largest homebuilding grants to first-time homeowners, worth $50,000 and $60,000 respectively.
The CLP also offers $30,000 to people if they move to the NT and build a new home, regardless of whether they already own a property or not.
There are concerns that these grants could lead to an unprofitable boom in the local residential construction sector.
Darwin construction worker Andrew Harvey fears his family business will not make a profit after the Northern Territory election in August.
He believes the promise of Australia’s most generous home building grants could boost Darwin’s construction market – but will be a boon for businesses like his.
The Rural Liberal Party and Labor are campaigning for first-time homeowner grants of $50,000 and $60,000 respectively.
In other jurisdictions, construction grants range from $10,000 to $30,000.
“I don’t think this project will be profitable,” Mr. Harvey said.
Mr Harvey said the expected increase in the costs of skilled labour, materials and land was expected to erode his profit margins.
“Subcontractors are really in high demand now, especially construction and tile workers,” he said.
His company has limited scope to raise its prices, due to the need to attract customers who could instead buy an existing property in Cheapest housing market in Australia’s capital.
“I would be very careful… when signing contracts. I don’t want to extend them for too long,” Mr. Harvey said.
“Banks will only accept fixed-rate contracts.” [between builders and their clients]“So that leaves you with very little room to adjust prices during the construction period.”
He said homebuilding grants for the first homebuyer of $20,000, distributed gradually over a three-year period, would be more sustainable for the industry.
The current NT grant is $10,000 for first-time home buyers who are building or purchasing a new home.
Western Australia construction collapses a warning to the Northern Territory
Economist and senior fellow at the Australian Strategic Policy Institute, Ian Satchwell, said: Overstimulation of the residential construction industry in Western Australia It should serve as a warning to the New Testament.
First-time homebuilders in the state have been able to access a total of $45,000 in state and federal grants during the pandemic.
Hundreds of residential construction companies Then he went bankrupt after that.
“They found themselves trapped between fixed-price contracts and rising costs,” Satchwell said.
“This has left homeowners waiting up to three years to get their homes back, and paying mortgage payments, as well as rent, on their current residences.”
Northern Territory construction industry in recession
In the year to May 2024, housing approvals in the Northern Territory fell by about 40 per cent, compared to a 10 per cent decline nationally.
The CLP’s industry stimulus scheme is capped at $20 million, and also includes a $30,000 grant for people who move to the Northern Territory and build a new home, regardless of whether they are already homeowners.
Labor has pledged $22 million for its policies, which target only first-time homeowners in the Northern Territory.
Both policies are risky for the residential construction industry, Mr. Satchwell said.
“That definitely set off alarm bells in my mind,” he said.
“In a small market with limited capacity in the construction sector, this raises a series of significant risks, and these risks must be managed.
“Governments need to ration the amount of stimulus they inject into the market at any one time and spread it out over a number of years.”
Conditions are more favorable than they were during the pandemic.
But not everyone is worried that grants might cause problems.
Luis Espinosa, regional executive director of the Housing Industry Association, said his organization has been lobbying both major parties for incentives larger than the $10,000 currently on offer.
However, Mr Espinosa said he “never expected” the new grants to be so generous.
“I think it’s great, and it’s going to go a long way,” he said.
He also said that conditions for stimulus measures are more favourable than they were during the pandemic.
“During the Covid period…costs went up not only because there were financial incentives there, but because there were no materials,” he said.
The territory’s Labor leader Eva Lawler said she was not worried about the consequences of her policy, saying the construction pipeline would be “fairly smooth” under Labor.
“We really need to lower interest rates…” [but] “Until that happens, I don’t think we’ll see the massive escalation that we saw during Covid,” she said.
Left-wing Labour leader Lia Finocchiaro also dismissed concerns that the party’s policy could overheat the construction market.
“Our homebuilders are having a hard time retaining their staff because there is no demand for their services, and people don’t trust construction here in the area,” she said.
