RBA: First home grants are a ticking time bomb

The first-home buyers grant may end up doing damage to the housing market by excluding buyers from the low end of the property market, a spokesperson for the Reserve Bank of Australia (RBA) has warned.

Ric Battellino explained that if the first-home buyers grant was extended past its June deadline then developers may start pricing the bonus into the cost of properties at the low end of the market, leaving first-timers shut out of the market once more.

"It doesn’t take long for the average house price to increase by $20,000 and leave the buyers no better off," he warned.

The Daily Telegraph reports that property experts ABN Amro are viewing the market as "inherently risky" and warning that the first-home buyers grants may create a housing bubble that could burst later in the year when unemployment rises.

Martin North, managing director of Fujitsu Consulting, gave a similar message earlier this week, warning that the recent wave of new low-interest home loans may entice people into the market despite a lack of job security.

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