The First Home Buyer Grant and house prices in Australia

Abstract

Australia’s First Home Buyer Grants (FHBG) was designed to assist first home buyers into the market through a range of measures, grants and assistance packages. From the year 2000 there has been a strong increase in house price resulting in house prices nearly doubling between 2000 and 2008, well above the CPI or normal investment growth rate. This paper sets out that the FHBG was a main driver of these increases and attempts to measure by how much. We have considered if the FHBG is a direct driver of increasing median house prices and an indirect driver through increased borrowing ability. Due to the combination of the FHBG, the ability to borrow more, and an inelastic supply, we have concluded that the FHBG did increase the median price of houses in Australian by approximately $57,321.