Many buyers of single detached homes in cities such as Sydney and Canberra will miss out on the latest Commonwealth stimulus package, a development lobby group has warned.

In an effort to stimulate the building industry after COVID-19, the Commonwealth Government has announced a new HomeBuilder grant of $25,000 for those who purchase newly built homes or substantially renovate existing homes.

According to the NSW branch of the Urban Development Institute of Australia (UDIA NSW), however, threshold limits mean that many buyers particularly in metropolitan Sydney will miss out.

To be eligible for the scheme, the value of the homes will need to be $750,000 or less in the case of new home purchases or $1.5 million or less in the case of existing home renovations.

As UDIA’s analysis shows, however, many purchasers of new homes may find that their land and construction cost exceeds this threshold.

In metropolitan Sydney, the average price of vacant residential land currently sits at $469,000 per lot, according to data from Research4 and UDIA itself.

Add in around $350,000-$400,000 in average construction costs and this takes the estimated average cost of a house and land package to $819,000-$869,000 – well exceeding the $750,000 threshold for the new grant.

Accordingly, many Sydney buyers will miss out on the grant unless they choose a non-single detached dwelling such as a unit, townhouse or apartment.

In a similar vein, UDIA says many prospective buyers of detached houses in Canberra and the ACT will miss out as their estimated average house and land package will cost between $770,000 and $820,000.

Across regional NSW, however, purchasers may fare better.

In Illawarra and the Hunter regions, most buyers will find that the value of their homes is under the threshold and that they qualify for the grant (see chart).

As well, UDIA NSW says many who renovate their home may miss out on the money being offered for renovations as the Commonwealth scheme requires construction to commence within three months of contract signing.

This, the UDIA argues, effectively means that those renovations for which development approval is required will not be eligible for the scheme.

Finally, UDIA NSW say the tight timeline with the scheme (which finishes at the end of the year) will make it difficult for multi-storey unit developers engage in pre-sales for the apartment sector in time to access the scheme.

As a result, the scheme will have primary application in greenfield markets as opposed to multi-storey development.

This, UDIA argues, could be problematic for objectives to pursue a more diversified housing mix and to limit urban sprawl.

Despite the reservations of UDIA NSW, the broader construction sector has welcomed the program, which the government says will help support 140,000 direct jobs and 1 million related jobs in residential building.

Groups such as Master Builders Australia  and Housing Industry Association have welcomed the program as an important stimulus measure which will help the building sector to ride out COVID-19.

Whilst supporting the program in general, UDIA NSW called on the government to address ‘gaps’ in the scheme.

UDIA NSW would also like other federal and state reform measures such as greater infrastructure investment, faster planning and environmental approvals and greater certainty with infrastructure contributions over the COVID-19 period.

“It was critical the Federal Government acted, and now we need the State and Federal Governments to co-operate to fill these critical ‘gaps’ in the HomeBuilder scheme (such as townhouses and off-the-plan apartments), as well as fixing planning and state taxation barriers to new housing,” UDIA NSW said in a note to its members.

“This will help ensure that we can deliver a housing-led economic recovery in NSW.”