KR Peters Director Peter Nicolls has called on governments both state and federal to stop pumping money into the overheated housing market via grants and subsidies.



Mr Nicolls said grants, cash handouts and deposit schemes were making Australia's housing affordability crisis even worse and putting pressure on builders.



"Right now we don't need any more grants. The grants should stop," said Mr Nicolls.



"There should be stamp duty assistance to first home buyers and I believe banks should offer home buyers a discounted home loan in recognition of their savings history as a reward."



The raft of grants currently on offer to home buyers in Australia include:



* The First Home Loan deposit scheme allowing buyers to stump up as little as 5% deposit to avoid paying Lenders Mortgage Insurance.



* The Family Home Guarantee, allowing single parents to purchase property with as little as 2% deposit and again avoid Lenders Mortgage Insurance.



* The First Home Super Saver Scheme.



* Stamp Duty exemption is available to Victorian first home buyers who purchase a new or established property with a dutiable value up to $600,000. Duty concessions apply for properties between $600,000 and $750,000.



Last year the Federal Government pumped millions into the property industry via its HomeBuilder scheme which offered home builders or those renovating one- off $25,000 grants.



Mr Nicolls says the artificial stimulation does little but push up prices further and put pressure on builders who are already feeling the squeeze from labour and material shortages as well as rising costs.



In the first three months of this year alone, the property industry has been rocked by multiple building collapses, most notably Probuild and, more recently, Queensland company Condev.



Condev says it has been crunched by rising material costs, which have skyrocketed 25 per cent in 18 months. It had 18 projects on its books when the liquidator was called in earlier this month.



Another privately owned Queensland builder, Hutchinson Builders, told the Financial Review that on a turnover of $3 billion, the company will make $30 million profit, or 1 per cent.



Mr Nicolls said things may get even worse for builders and if key costs such as petrol keep rising the 1 per cent margin forecast by Hutchinson may shrink even further.



"If prices continue rising that 1 per cent will be absorbed or if they make a mistake it will also disappear. All builders are working on very tight margins. Builders are ripping up contracts in Melbourne because they know they will lose money."



Mr Nicolls says governments are partly to blame for the industry's precarious position.



"What is happening is that when governments fund all these grants for home buyers, developers just increase their prices, demand increases and builders can't keep up."



Mr Nicolls knows of developments that were selling for $800m2 two to three months ago that are now selling for $1000m2.



"Because developers have been so successful selling they are now drip feeding land onto the market at exorbitant prices.



"Prices have risen so much they are at dangerous levels now and it will only get worse for the consumer.



"The best remedy in my opinion is to cease all the grants.



"Builders can't keep up with demand and prices have skyrocketed. Grants are no longer having the desired effect."