Uncertainty haunts stimulated sector

LAST year's boost to the first home owners grant and cuts to interest rates have given rise to a two-tiered property market, with the first home buyer and sub-$500,000 market firing while the middle to upper end of the market languishes.

But while the June 30 deadline for the end of the grant boost nears, many in the industry are concerned about what lies ahead for the second half of 2009.

Master Builders Association director Gavan Forster said the industry was currently being artificially stimulated, and questioned what the situation would be in six months' time.

"I think there's a few clouds on the horizon in that market because even if the grant is extended, then you eventually run out of first home owners," Mr Forster told the WA Business News property forum.

"In the second and third home market, buyers are just paying off debt. They've got burnt on the share market, they've got reduced wealth and they're just not buying.

"The flow-on effects from the first home buyers usually take about two years to show up in the second and third home market, so what's happening in the first home market is the knock-on effects will take some time to get through."

Real Estate Institute of WA president Rob Druitt said the kick in the market this year was evidence of pent-up demand, with activity based on sentiment.

"Last year people were paralysed, they didn't want to do anything because it was all doom and gloom. This year they've sort of relaxed a little bit," he said.

"I think we're in an Indian summer and I'm concerned about the second half of the year; it's not flowing onto the middle and top end of the market. It's only the opportunistic buyers who are coming into the market we've seen get really good value.

"It's difficult to predict what's going to happen in the second half of the year because we're at that point that it's a little bit artificial at the moment, so where do we go from here?"

Rob Spadaccini, managing director of luxury homebuilder Spadaccini Homes, said his business had remained buoyant after a dip late last year.

"We are steady. We did get affected around October and November last year; we had quite a few projects put on ice but they are revisiting us now," Mr Spadaccini told the forum.

"There have been more players coming into the market, whether they are successful is another story, but they are shifting and trying to pick up what they can."

Paul Sadlier, managing director of residential developer Cedar Woods, said the boost to the first home owners grant, combined with interest rate cuts, had effectively stimulated the market in recent months.

He said the low interest rate environment was also giving rise to more investors entering the market.

"For people who've got a job, a savings record, and with petrol prices down, interest rates down, if you've got your job you're in a much better position than you were 12 to 18 months ago," he said.

"And that's going to continue for a couple of years now. I don't think you're going to see rates going up in a hurry, we're going to have a down cycle for a little while yet.

"We're starting to see some investors coming back now the stock market has got the jitters and interest rates are low. There are people who do have funds going into super and it's a good buyers' market.

"If you take a medium-term outlook then now's probably a good time to get into investment property."

And while the federal government has reportedly dismissed a continuation of the first home owner grant boost after June 30, the industry has called for an extension of the grant to second and third home owners, or a phase-out approach.

"The bottom end is pretty buoyant and pretty busy at this time of year given June 30 is the so-called end of the first home owner grant boost," ABN Group managing director Dale Alcock said.

"I think there's a lot of concern or expectation about what comes after, we're sort of going up to the edge of the cliff and there doesn't seem to be any life after it.

"My hope would be that government extends [the boost] to the end of December but that they maybe apply a $14,000 boost to second and third home owners."

Cedar Woods' Paul Sadlier said a phase-out of the grant boost would help the industry, rather than just a sudden end to the program.