This week the Victorian Government announced a raft of policy initiatives aimed at helping first home owners get into the market and improve housing affordability for buyers and renters. In short the announcements were:
• No stamp duty for first home buyers buying properties up to $600,000 (creating a potential saving of up to $15,000 over and above current first home buyer stamp duty savings)
• First home purchases between $600-$750K will get a concession on the stamp duty payable on a sliding scale
• A doubling of the First Home Owners Grant from $10K to $20K for new houses built in regional areas and valued up to $750,000
• A pilot program will give around 400 people the chance to co-purchase a dwelling with the government who will take an equity share of up to 25% in the property. To qualify the buyers will need to have a 5% deposit and in the case of a single person be earning no more than $75K pa or $95K in the case of couples. The government will cash out its share in the property when the property is sold.
• A new tax (1% of the property’s capital improved value) on owners who leave properties vacant aimed at increasing properties available in the rental market and discourage “land banking” (buying property and sitting on it waiting for the property value to increase without utilising the property further)
• The release of land for 100,000 new homes and the creation of 17 new suburbs in growth corridors
What we think:
I think that the grant for First Home Buyers in regional areas is a great initiative which works on a number of fronts. It helps people to be able to afford a home and encourages the movement of population away from (an overcrowded) Melbourne. A number of our clients have moved to regional Victoria for both lifestyle and affordability reasons and love their new lives. The grant will undoubtedly encourage more people to try it.
The co-purchase program is an interesting one but difficult to assess both because little detail on the program is available at present and because while a similar program is operational in Western Australia I can find no commentary on the success (or otherwise) of the program.
While many will think that the stamp duty savings for first home buyers is a great idea and will help first home buyers, I doubt this will have the desired impact. And I am not on my own in this thinking with a raft of commentary in the media predicting that the cut to stamp duty is likely to increase property prices further – hurting first home buyers rather than helping them.
The rationale is simple, cutting the stamp duty will attract more first home buyers into the market. This will increase competition for existing properties which will push prices up. And in an instant the benefit of abolishing stamp duty will go up in smoke.
The initiatives announced are an attempt to address both supply and demand sides of the equation and should help those looking to buy new homes on the fringes of Melbourne or in regional areas. Unfortunately, these announcements will do nothing to help first home buyers desperate to buy and live within 15km of the city.
But I am not sure there is much that can be done to make inner city property more affordable (cheaper) to buy and perhaps the only solutions for those that can’t afford to buy inner city is to either accept this reality and buy further out (and not stretch themselves beyond their means) OR rent inner city and buy an investment area somewhere they can afford (giving them “lifestyle” but also getting them into the property market and working towards securing their financial well being.