So now I'm something of a finance nerd
http://www.theage.com.au/opinion/great-australian-scream-20090421-ae0e.html?page=-1

A few people have been sending me this article. It's got some points but overall I think it's misleading and wrong.

Here's the most offensive misleading quote:
"Anything that puts additional cash in the hands of buyers … results merely in more expensive houses."

Now that's almost a true statement, but it doesn't apply to FHOG in the way you'd assume.
Using numbers that aren't real, say a property is worth 100k. Both I and an investor have 100k, but the investor has been buying houses before.
Gov't comes along and gives all First Home Owners 20k. This causes the property to rise in price to 120k (maybe more maybe less, the exact rise doesn't matter).
I am now better off, I have 20k more to spend on this property than the investor and it is therefore more affordable to me than it is to the investor.


The second thing is the way they say rent money is not dead money, again, it's true but misleading.
If all you can afford is the minimum repayment on your loan, then you are loaning too much.

If you can afford to pay 1/2 again or double your loan repayments, even for the next 5 years, you're going to cut more than half the duration of the loan and pay less than a quater of the interest.
I can appreciate that this is difficult for people with children and other expenses, but at the end of the day it comes down to people over-extending themselves, wanting to have it all now and not making wise decisions.


The last issue I have with the article is that it tries to give you the impression that you can't make houses more affordable for people without houses without making house prices drop, and that's not strictly true, all you have to do is keep pumping more money into FHOG's and similar schemes.