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In short:
Ahead of the NT election, the Country Liberal Party and Labor are promising Australia's most generous home builder grants for first home owners, at $50,000 and $60,000 respectively.
The CLP is also offering $30,000 to people if they move to the NT and build a new home, regardless of whether they already own a property.
There are fears the grants will lead to a profitless boom for the local residential building sector.
Darwin builder Andrew Harvey worries his family-owned business won't be making money following August's Northern Territory election.
He believes that promises of Australia's most generous home builder grants could lead to a boom in the Darwin construction market — but that it would be profitless for companies like his.
The Country Liberal Party (CLP) and Labor are campaigning on grants for first home owners worth $50,000 and $60,000 respectively.
In other jurisdictions, available building grants vary between $10,000 and $30,000.
"I don't believe it will be profitable," Mr Harvey said.
Mr Harvey said predicted cost increases in skilled labour, materials and land would erode his profit margins.
"Subcontractors are already in high demand now, block layers and tilers in particular," he said.
And his company has limited scope to raise its prices, because of the need to attract clients who could instead buy an established property in Australia's cheapest capital city housing market.
"I'm going to be very cautious … signing up contracts. I don't want to extend them too far ahead," Mr Harvey said.
"Banks will only accept fixed-price contracts [between builders and their clients], so it leaves you with very little leeway to adjust prices over the period of a build."
He said first home buyer building grants of $20,000, distributed gradually over a three-year period, would be more sustainable for the industry.
The current grant on offer in the NT is $10,000 for first home buyers who build or buy a new home.
Collapse of WA builders a warning for the NT
Economist and senior fellow at the Australian Strategic Policy Institute, Ian Satchwell, said the overstimulation of Western Australia's residential building industry should come as a warning to the NT.
First home builders in the state were able to access a combined $45,000 from state and federal grants during the pandemic.
Hundreds of residential building companies subsequently went broke.
"They got squeezed between their fixed price contracts and rising costs," Mr Satchwell said.
"It's left home owners waiting for up to three years for their houses, and paying mortgages, as well as rent, on their existing accommodation."
NT building industry in a slump
In the year to May 2024, residential building approvals in the NT fell by almost 40 per cent, compared to a 10 per cent decrease nationally.
The CLP's scheme to stimulate the industry is capped at $20 million, and also includes a $30,000 grant for people who move to the NT and build a new house, regardless of whether they are already home owners.
Labor has committed $22 million to its policy, which is for NT first home owners only.
Mr Satchwell said both policies were risky for the residential building industry.
"It certainly triggered alarm bells in my mind," he said.
"In a small market with limited capacity in the building industry, it raises … a series of pretty substantial risks, and those risks need to be managed.
"Governments need to ration the amount of stimulus they put into the market at any time and spread it out over a number of years."
Conditions more favourable than during pandemic
But not everyone is concerned the grants could cause problems.
Housing Industry Association regional executive director Luis Espinoza said his organisation had been pushing both major parties to pursue larger incentives than the $10,000 currently on offer.
However, Mr Espinoza said he "never expected" the new grants to be so generous.
"I think it's great, it's going to go a long way," he said.
He also said conditions for stimulus measures were more favourable than during the pandemic.
"During COVID … costs went up not only because there were financial incentives there, but because there were no materials," he said.
Territory Labor leader Eva Lawler said she wasn't concerned about the consequences of her policy, and said the pipeline of builds would be "fairly smooth" under Labor.
"We do need interest rates to come down ... [but] until that happens, I don't think we'll see the huge escalation that we saw during that COVID period," she said.
CLP leader Lia Finocchiaro also dismissed concerns the party's policy could overheat the construction market.
"Our home builders are struggling to be able to keep their staff because there's a lack of demand for their services, people don't have confidence to build here in the territory," she said.
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