When you buy a TV for $1000 and the store gives you a $200 cash rebate, what is the TV really worth? I hope you said $800!
So when a young couple buys an off the plan house for $550k and the government gives them a bag of goodies totaling say $50k (stamp duty saving, first home buyer grant, first home buyer mortgage insurance waiver and the new builders grant), then what is the house really worth?
At a maximum, I hope you said $500k. In fact, if it wasn’t for the leverage the government created, it would be worth even less. Therefore, the young couple who thought they got $50k for free, is actually behind because their house is probably worth say $70k less than the official purchase price. So who won and who lost out of this government interference?
- The couple that bought a house for $550k because it’s now worth around $480k. They are also mortgage prisoners because they can’t escape banks having negative equity.
- Tax payers who funded the $50k of savings that went to the couple
- The developers because they sold more properties at a higher price
- The government because the developers paid more taxes
- The banks because if you are a mortgage prisoner, you are trapped with whatever rate the bank offers you.