Predictions are that First Home Buyers (FHB’s) will be on the march in 2024. Certainly if the activity I have seen in the last 2 weeks is an indication there will be a hive of FHB activity this year.
This is at a time when investor activity has dwindled. The sharp rise in interest rates has really put the crunch on investor buying activity and has led to a sell off of investment properties as the higher rates have affected their ability to afford their investment loans (on top of their home loan and the surge in cost of living).
A common question I get asked by FHB’s is what government assistance they can get. So I thought it would be useful to summarise this in one spot…
First Home Owners Grant (FHOG)
The FHOG is a grant of $10,000 available where FHB’s are purchasing a new property (off the plan or otherwise never lived in before) for no more than $750,000.Â
To be eligible for the grant you must never have owned a home before, you must be an Australian citizen or Permanent Resident, and you must move into the property within 12 months and live there continuously for at least 12 months.
This is a Federal grant so is available nationwide.
Stamp Duty Concessions
In Victoria, Stamp Duty is waived for First Home Buyers on the purchase of a Principal Place of Residence for under $600,000. Above $600,000 up to $750,000 stamp duty starts to apply in increasing amounts until full stamp duty is payable at $750,000.  Â
Stamp duty on a $600,000 purchase for non FHB’s is $31,070 so the waiver is a significant benefit and as a result many first home buyers seek to buy for under $600K or as close to that mark as possible.
As Stamp Duty is a state tax, the benefit offered to FHB’s varies from state to state
First Home Guarantee (FHBG)
This program allows you to borrow up to 95% of the purchase price without incurring Lender’s Mortgage Insurance, potentially saving you up to $15,000 and allowing you to buy a first home with as little as a 5% deposit (which must be genuine savings).Â
There are a range of criteria to qualify. Applicants must be Aust citizens or permanent residents.
There is also an income test. Individuals must not earn more than $125,000 pa and joint applicants must not earn more than $200,000. Income is assessed off the Notice of Assessment for the year immediately beforehand (in other words FY2023 presently).
Lastly, there is a price cap on homes. If you buy in Melbourne or Geelong the max property price is $800K. In regional Victoria the cap is homes up to $650,000. Price caps vary by capital city/region.
Family Home Guarantee
Similar to the First Home Guarantee but targeted at single parents with dependent children. The minimum contribution may be as low as 2%. This is a national program like the FHBG.
Case Study
The concessions really do add up. Below is a comparison of a $600,000 purchase for a FHB compared to the same purchase without any concessions. Â
A $600,000 budget would get you a 1-2 bedroom apartment in the inner suburbs (Armadale, Malvern, Caulfield, Carnegie, Elwood, Brunswick, Northcote, Coburg) or a unit/townhouse in middle tier suburbs (Cheltenham, Mentone, Reservoir, Mulgrave).
| First Home Buyer | Without Concessions | |
| Purchase Price | $600,000 | $600,000 |
| Stamp Duty | $0 | $31,070 |
| Registration Fee | $1,500 | $1,500 |
| Registration of Mortgage | $120 | $120 |
| Lenders Mortgage Insurance | $0 | $21,000 (approx) |
| Total Cost | $601,620 | $653,690 |
| Borrowing at 95% | $570,000 | $570,000 |
| Your contribution | $31,620 | $83,690 |
| Total Funds | $601,620 | $653,690 |
Note: This table does not take into account the cost of conveyancing, building inspections etc
The total cost to the FHB is over $50,000 less and the amount they need to make the purchase happen is just over $31,000 rather than over $83,000.
For typical FHB’s this makes buying a home far more achievable, in a far shorter amount of time. That might be 12-18 months savings (starting from $0) compared to 3-4 years without the various assistance.
If you are looking to buy your first home and have questions, please feel free to contact us and let us help you on your way.
