With a number of first home buyers having trouble cracking the property market, some are expected to face a further blow with certain Government grants being scrapped.
With a number of first home buyers already having trouble cracking the property market, some are expected to face a further blow with certain Government grants being scrapped.
Both Western Australian and Tasmanian Governments have announced that changes will be implemented this year to the first home buyer grants. In Western Australia, the Government has proposed to lower the stamp duty threshold for first home buyers to $430,000 from $500,000 on July 1 2014. Although the stamp duty threshold for new homes will remain unchanged, land tax is set to increase by 10%. This is in addition to the land tax rise of 12.5% last year.
These proposed changes follow the Barnett government’s decision to slash the First Home Owner Grant for established properties to $3000 from $7000 last September and are expected to save the government $222 million in the next four years to 2017-2018.
The Barnett government has claimed that, despite these cuts, the stamp duty concessions are still generous compared to the other states. Queensland is the only other state where first home buyers pay less stamp duty for a $450,000 existing property.
The first home buyer sector in Tasmania is also expected to be affected by grant cuts. The $7000 First Home Owner Grant will be removed at the end of June and the First Home Builder Boost, which gives an extra $23,000 to those who build or buy a recently built home, will also be scrapped in December this year.
This has created great concern for first home buyers in the real estate market, with numbers already dwindling. According to the Real Estate Institute of Tasmania (REIT), the number of first home buyers in the market fell from 18% to 17% between December 2013 and March 2014 and these grant cuts may make it more difficult for some to get their foot in the market.
First Home Owner Grants are extremely beneficial for buyers as it can help fast track the saving process. Saving for a sufficient deposit is a major hurdle for first home buyers. According to the Genworth Homebuyer Confidence Index (March 2014), almost 60% of first home buyers estimate it would take them four years or more to save for a 20% deposit and this extra $30,000 hit will not make it any easier.
If state Governments continue to axe First Home Owner Grants, it is likely that the number of first home buyers in the real estate market will continue to decline.