Builder 'livid' at calls for first home buyer grants

Calls for first home buyer grants to boost housing construction face opposition from an unexpected quarter - home builders.

ASX-listed builder Tamawood on Wednesday said calls by groups, including  Master Builders Australia for a $40,000 cash grant and the Property Council of Australia for a $50,000 cheque to new home buyers, had caused many customers to stop making inquiries and wait for a boost to come.

"Our numbers were coming back to close to what it was pre-COVID and while we’re still seeing a number of people, nobody is willing to commit - they’re waiting to find out what the government’s going to do," Tamawood executive chairman Robert Lynch told The Australian Financial Review.

"Everyone who was going to buy a house is saying, 'I’m not going to buy a house because I’m going to get $50,000 by hanging on'."

Tamawood is not alone. Industry veteran and Housing Industry Association president Simon Norris said on Wednesday other builders were also finding potential buyers were suddenly sitting on their hands in expectation of a cash grant.

The HIA has not called for a cash grant to boost home building.

"We are hearing that purchasers are delaying their decisions to buy or build, which is unfortunate," Mr Norris said. "It’s stopping them from committing."

HIA figures published this month show new home sales slumped 23 per cent during March and April.

Builder and developer AVJennings last week scrapped its earlier forecast of a stronger FY20 than last year and said new sales were "well below" pre-pandemic expectations.

Even if the government came out with a cash grant in six weeks' time - drawing buyers now sitting on their hands back into the market - a six-week wait would send many smaller builders under, Mr Lynch said.

"That’s a massive hole in the industry," he said. "Smaller builders are going to go out of business completely."

Tamawood, which sells up to 80 per cent of its homes in Queensland under the Dixon Homes brand, was the state's 11th-largest home builder last year in the HIA-Colorbond Steel 100 Housing ranking.

The company does not oppose federal government stimulus to boost housing construction - which ABS figures on Wednesday showed contracted for a seventh straight quarter in March - but says cash grants would push up prices for buyers of new homes and create more competition for sellers of existing dwellings that buy their second or third homes from Tamawood.

"We’ve seen this in the past," Mr Lynch said. "It will mean people who have existing houses will be hit badly. The existing home sales will drop - people will have to drop price to compete with the new homes."

He was angry with the lobby groups that had called for cash grants.

"We’re livid. For industry bodies who should understand the effect of what they’re saying - to come out with announcements like this is just ridiculous," he said.

In a letter sent to Treasurer Josh Frydenberg, Tamawood said a better method of stimulating housing construction would be for the federal government to compensate states for removing stamp duty on new land sales.

This would encourage new home building without influencing bank valuations and existing home sales, it said.

Alternatively, the government could provide extra financing for buyers who didn't qualify for loans from commercial lenders, Mr Lynch said.

"If the government comes out tomorrow and says, ‘we’re not doing anything, so there’s not going to be $50,000 or $40,000 coming out’, we’d be happier than the current situation," he said.