It has taken a few days for the immediate impact of the NSW budget housing initiatives to sink in.

The initial headlines exulted Treasurer Mike Baird’s decisions. But there are emerging short-term humps — through the creation of needlessly complex artificial deadlines — for the NSW housing and property industries to overcome. And then some serious long-term consequences that could potentially affect residential property across Australia.

After all, NSW has broken from the 12-year pact that has given established home sellers the potential benefit of buyers with the first home owners’ grant. Now established home sellers in NSW will not get any benefit from the grant that derives from Howard government GST introduction negotiations with the states in 2000.

The short-term issues are timetabling issues for buyers and developers. It was pointed out by Property Observer shortly after Tuesday’s midday budget that NSW investors faced an immediate conundrum. It’s actually a NSW government-induced “money or the box” scenario.

And the government really should know better than create a situation where property investment is an even bigger lottery than normal.

For the next 16 days, investors have a zero stamp duty option — and the potential saving of $22,490 through the NSW home builders’ bonus. It’s available if investor buyers put a deposit down for an off-the-plan purchase or new house costing less than $600,000.

But from July 1, 2012, the best deal for government grants will be a fixed $5000 offering in a new scheme for investors of new homes, whether off the plan or newly built.

It then became apparent from the budget papers minutiae that first home buyers face a timetabling scenario too — as they might best hold off their buying to await the full bonus until October. Property Observer advised its readers on the day after the budget that despite the NSW government’s best intentions, sales of new houses and apartments to first time buyers could possibly ease off temporarily until October 1. Savvy first home buyers might delay their new home acquisitions to secure an $8,000 bonus based on a $550,000 new dwelling.

The entitlement of first home buyers who sign a purchase contract for a new home between the state budget and September 30 is $20,240 plus $7000 totalling $27,240. But wait until October 1 and it’s $20,240 plus $15,000, a total of $35,240.

Those immediate glowing headlines didn’t quite contain the requisite consequential details required by the welcoming property development industry hardheads.

In some sense, the drilling down into the details doesn’t reveal anything too serious in the short term for the property development industry, which, it has to be said, retains its repeated podium placing when it comes to awards for getting government handouts. But both deadline issues are the by-product of governments that nowadays regularly delay the introduction of special initiatives, presumably so that they get two lots of favourable headlines — on announcement and then on implementation.

Government by press release.

Recall the Queensland Treasurer Andrew Fraser unveiled his $10,000 new home building boost grant in his June 2011 budget. And the home building industry immediately went dead because its introduction date wasn’t until August 1. Accordingly, Queensland led a national fall in dwelling approvals in June, with an 18.6% fall compared with May highlighting the naïve, and often cruel, hand of government intervention.

Veteran NSW unit builder Harry Triguboff has cottoned on that changes announced by the NSW government to home buyer incentives are set to create short-term distortions especially between July 1 and October 1. “Nothing will happen,” he told the Australian Financial Review. “The government will have killed the investors and still not given birth to the first-home buyers.”

But between now and July 1 when it comes to investors, Triguboff says: “We have to go hell-for-leather to sell before July 1 to investors, because they’ll still get something.”

Three months then elapses before the October 1 start of the full $32,450 generosity of the new first home owners’ grant and stamp duty concessions. “For the [interim] months, it’s going to be hopeless,” Triguboff says. “I cannot enter into an agreement and say we’ll exchange it after October; it’s illegal. I would defeat the purpose of what the government is doing.”

The new package excludes the buyers of existing homes altogether. And industry chief are optimistically suggesting little impact on the first home buyer market when it comes to established unit and house sales.

Real Estate Institute of NSW Tim McKibbin didn’t like the decision but says he did not expect any significant changes to the second-hand market. And Raine & Horne chief Angus Raine also says the second-hand market would experience little impact.

But that’s not what’s emerged from January 1, after the NSW government’s initial decision to shift first home buyer interest towards new homes and away from established homes. It was in last year’s NSW budget.

The latest numbers show a dramatic downturn in first home buying as indicated in the latest report on NSW housing by CBRE. Following the initial removal of concessions for existing homes from January 1 the data indicates first home buyers constituted 15.1% of the market in early 2012, down from the over-representative 26.3% in December 2011, when there was a rush by first home buyers to get the then bigger government handout.

First home buyer activity is now sitting at 2005 levels, CBRE notes, in the wake of the first stage of the phasing out of the concessions for existing home purchases. It will be interesting to see the renewed consequences of the further narrowing of buying options which of course comes accompanied by a generous increase in government handout for first time buyers of new homes. But will it get to new house buyers or just new unit buyers?

Boosting housing on the city fringe takes time and will require a quantum shift in Gen Y buying location preferences. So surely most of the short-term buyers will use their grant on new apartments in the inner and middle ring suburbs, an industry which is not doing too badly at the moment.

“This budget is meant for cottages, and nobody wants cottages,” Triguboff says. “They all want apartments.”

Escalation in the off-the-plan prices of trendy, new inner-city studios will be worth watching during 2012.

An interesting tip from Ted Hoskin, the CBRE NSW residential mortgage valuations senior director, is that down the track the main buying activity, and therefore beneficiaries, arising from the state budget decisions will be seen in the new home sector in the north and south-west growth centres.

The golden era of government grants assisting the established housing market is ending.

Not so much because governments ever viewed it as the disparagingly dubbed “first home sellers’ grant” but rather because the emphasis is understandably fixed on poor construction numbers and housing shortages. So standby for the other state governments proposing their initiatives to also seek to turn around housing supply shortages.

*This article was first published at Property Observer