* Grants of $14,000 and $21,000 stay until September 30

* Scaled back after September

FIRST-HOME buyers will have an extra six months to claim the Federal Government's more generous grants in a politically popular move designed to continue stimulating the housing construction sector.

The Treasurer, Wayne Swan, announced that people buying their first homes by September 30 would be eligible for a grant totalling $14,000 if they purchased an established house or apartment.

Those buying a newly-constructed dwelling would continue to be eligible for a $21,000 grant provided they entered their contract by September 30. For people buying their first homes from October 1 until December 31 this year, the grants would be phased down to $10,500 on established homes and $14,000 for new dwellings.

The Government originally announced the boost to the first-home owners scheme last December and said the more generous grants would expire at the end of June. That would have reduced the total grant to $7000.

Mr Swan told Parliament last night the boost to the grants had helped 59,000 people buy their first home and supported employment in the housing sector. "In light of the continuing global uncertainty and the success of this initiative, tonight I announce that we will extend the boost for a further six months - including three months at the full rate before stepping it down."

The grants will then fall back to their original level of $7000 for people buying their first homes after December 31. The cost of the six-month extension to the federal budget will be $539 million.

The more generous grants to first-time home buyers are designed to help stimulate the wider economy by lifting activity in the housing market which has been one of the economy's weakest sectors.

Treasury's economic forecasts are for spending on construction of houses and apartments to be subdued in the short-term.

Investment in building dwellings is forecast to fall by 2.5 per cent this financial year and to register no growth in 2009-10 before recovering in 2010-11.

"The near-term outlook for dwelling investment continues to be dominated by low levels of household confidence and persistent funding difficulties for medium-density dwellings," the budget papers say. "As a result, dwelling investment is expected to remain flat in 2009-10 before staging a solid recovery in 2010-11 with growth of 11.5 per cent."

The six-month extension to the more generous first-home owners grant will be welcomed by the property sector and housing construction firms.

By increasing the number of first-home buyers entering the market it will put upward pressure on home prices, boosting the confidence of existing home owners, and generate more construction activity.

The budget papers say the boost has "contributed to a significant increase in demand by first-home buyers and thereby supported dwelling prices and auction clearance rates at the lower end of the housing market".

"Loans to first-home buyers have risen sharply to the highest level as a proportion of the market since 1991. This demand is expected to continue to flow through to increased investment in new dwellings and the extension of the first-home owners boost is expected to support activity over the year." - Sydney Morning Herald

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