HomeBuilder better than anticipated for ACT, Andrew Barr says

The concession comes as a new analysis finds the scheme, which provided grants to fund home construction or renovation projects, had a positive short-term impact on the Australian economy - but its longer-term effect remains to be seen.

The scheme, announced as part of a tranche of economic stimulus measures in response to the coronavirus pandemic, offered grants up to $25,000 for eligible people building or buying a new home, or substantially renovating an existing property.

In an interview with the Sunday Canberra Times, Mr Barr said the ACT government's housing market assumptions had changed as the market rapidly recovered.

"I'll confess I was wrong on this. I didn't think HomeBuilder would be as successful as it has been, and I probably underestimated just how much people would all reach the same conclusion as they were sitting around in lockdown that, hey, now's the time to go to Bunnings and do a home improvement project," Mr Barr said.

Mr Barr has previously said the booming ACT housing market recovered faster than the government expected, partly driven by increased investment in housing stock.

More than 2100 HomeBuilder program applications were made in the ACT, preliminary data from February showed. About 80,000 applications had been made nationally.

Of the ACT applications, 587 were for substantial renovations and 1586 were for new build grants.

Federal Housing Minister Michael Sukkar in February said Treasury's "wildest expectations" had been exceeded by the number of applications from the ACT.

"As far as punching above its weight, the ACT being four times higher than what Treasury expected when we set up the program is a really phenomenal result," Mr Sukkar said.

Mr Barr in June 2020 said the $700 million set aside for the federal HomeBuilder scheme would be better spent on helping states and territories reduce stamp duty in their jurisdictions.

A new paper, published in the peer-reviewed Economic Papers, found the program stimulated an increase in private new home sales, the number of dwellings approved and new loan commitments.

"Although the HomeBuilder program did not address the social and affordable housing concerns over the longer term ... it enabled the government to exploit the housing market to stimulate the economy in the short term. The mid- to long-term economic impacts of the HomeBuilder program might take years to unfold," the paper, written by the University of Canberra's Sarah Yu, said.

Dr Yu's analysis showed people who planned to purchase a house and land package, or build a new home on a pre-owned vacant block, would benefit the most from the program.

"People who plan to purchase off-the-plan apartments or townhouses are less likely to meet the tight timelines for the HomeBuilder program eligibility. The impact of the HomeBuilder program for the purchaser of off-the-plan apartments or townhouses is insignificant," the paper said.

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Dr Yu found the money spent on HomeBuilder grants would be subject to a "multiplier effect", which means the money would cycle through the economy and have a larger impact than the original grant amount.

"Builders who gain a job because of the transfer payment in the HomeBuilder program are able to earn more income. With more income, builders spend more and purchase more from firms. Firms are now able to pay their workers and suppliers. These workers and suppliers then buy goods from other firms. The other firms now can also pay their workers and suppliers, and so on. In this way, the government's initial injection leads to a higher final increase in real GDP than the initial amount," the paper said.

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