The Property Council of Australia has proposed a scheme that will encourage first-home buyers to break into the market after the COVID-19 outbreak.
The scheme will grant $50,000 to first-time buyers of newly-constructed dwellings. The federal government needs $2.5bn in funding to support 50,000 first-home buyers. The Property Council said no pricing cap would be imposed under the scheme.
"The aim is to bring forward all possible market demand and stimulate the greatest economic response," the council said.
If adopted by the federal government, the scheme would run for one year starting in July 2020.
The Property Council said states and territories are expected to initiate additional demand stimulus to complement the scheme.
Ken Morrison, chief executive of the Property Council of Australia, said the scheme is part of the Property Council's seven-point plan for economic recovery after the COVID-19 outbreak. He said the proposal could potentially stimulate the construction of around 50,000 dwellings and support 200,000 jobs.
"As Australia's biggest employer, which contributes over 13% of GDP, the property industry can be a powerhouse behind economic recovery and growth with the right policy settings and market incentives from the federal, state and territory governments," Morrison said.
Cameron Kusher, director of economic research at REA Group, said while this proposal will be beneficial to first-home buyers, it could potentially push up property prices.
"Once you start giving people those grants, prices start increasing, and while that makes people feel wealthier, it may not be what we need economically. We should be looking at ways to encourage more transactions, and removing stamp duty is one way to do that, and increasing people's borrowing power so they can get into their own home," he said in a report in News.com.au.
Abolishing stamp duty is also one of the policies suggested by the Property Council.
According to the council's proposal, the revenue from stamp duty could be sourced from broadening the GST base instead. Citing a model by Deloitte Access Economics, the proposal said the change would be able to boost consumption by $6bn to $9.6bn per year.