HomeBuilder causing false inflation in Tasmania’s real estate market as buyers rush to purchase and build

Builders are jacking up prices and land is doubling in price compared to several months ago thanks to state and federal home building stimuli, a property expert says.

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SKY rocketing land prices and concerns around rising construction quotes mean first home builders might not be seeing the savings they expected from state and federal grants.

Blocks are reportedly selling four times faster than in 2018 in areas like New Norfolk with prices almost doubling.

A report released this month by independent property valuation and advisory group Herron Todd White said the First Home Builders Grant had pushed the demand for residential building blocks since opening in June.

Land in New Norfolk is reportedly selling for double after the federal government’s HomeBuilder stimulus.

Up to $45,000 was made available through the $20,000 Tasmanian HomeBuilder grant and the $25,000 Commonwealth HomeBuilder Grant for transactions before December 31.

Property valuer Stephan Ning Liu said the sale of more than 20 blocks of land in a month in 2020 was not uncommon, “smashing the number of less than five in the same period in 2018”.

“We saw prices for standard lots rise from $75,000 in 2018 to $135,000 per lot [in 2020],” he said.

Mr Ning Liu said local builders had also increased their construction quotes “in response

to government grants”.

“Conversations with local builders have indicated that this may be due to a lack of qualified tradespeople and incidental increased labour costs.”

Herron Todd White Hobart residential manager Mark Davies said the cost to build a home was around $1750 not long ago, “but now it’s well in excess of $2000.

“Brick layers have increased their prices significantly in the past 12-18 months, because they can’t get that trade,” he said.

“I think the developers are making the most of it.”

Master Builders Tasmania executive director Matthew Pollock said he had not heard any reports of significant construction cost increases from members since the grants were announced.

“Within the program there is a specific clause ... that says you cannot increase prices in response to the scheme,” he said.

“There are provisions that protect consumers within the legislation, that prevent prices being inflated as a result of the grants, so that shouldn’t be happening.

Executive director for Master Builders, Tasmania, Matthew Pollock. Picture: Zak Simmonds

“If that was the case then you wouldn’t see a spike in the volume of new prospective homeowners coming into the market as a result of being able to access the grant.”

Mr Pollock said the increase in demand for land was certain and the surge in prospective home builders was constraining the industry.

The grants require significant construction to begin within three months of contracts being signed.

“It’s a very tight time frame for the quantum or volume of activity that has been brought forward as a result of HomeBuilder.”

Mr Pollock said a solution would be to extend the significant commencement criteria to six months, which Victoria has already done.

“By doing so they may give the industry a bit more time and ensure that as many people as possible can access the scheme.”

Mr Pollock said the construction industry was facing a “disaster” before the grants were announced.

“We are hearing is the HomeBuilder Grant has been an amazing success in bringing forward demand and bringing new home buyers into the market.

“There’s really never been a better time to be a new home buyer, particularly in Tasmania.”