Some years ago the government took a step to assist affordability for first home buyer looking to get into the market. This resulted in the First Home Buyers Grant which offered first home buyers the chance to receive $7,000 towards the first home they purchase, and during some periods this increased up to $21,000.
It also brought into place some concessions on stamp duty, which have been adjusted incrementally since that time and resulted in those buying their first home for less than $385,000 paying nil stamp duty. This concession was means tested; meaning those on higher incomes missed out on the concession all together. However the Home Buyer Concession Scheme is due to end in the ACT on the following dates:
– Existing properties: 31st August 2012
– New or substantially renovated properties: 31st December 2012
This means that in some cases Canberra buyers will now need to find an extra $14,000 when purchasing their first home. The First Home Buyers Grant remains unchanged at $7,000.
Whilst these first home buyers will benefit slightly from the recent moves by the ACT government to abolish stamp duty entirely over the next 20 years, the fact remains that house prices in the ACT are among the most expensive in the country, and whilst our wages are high comparatively so are our rents, and saving an extra $14,000 will add years onto many buyers purchasing decision.
Michelle is a local first home buyer who has managed to save enough for a 5% deposit on a unit in Belconnen. When we asked her whether she would be able to afford to buy the property is she was required to come up with an extra $14,000 for stamp duty, her response was emphatic:
“No way. It’s taken me nearly 3 years of saving while I rent to get to the point where I have the $20,000 for my deposit and legal costs, and I still needed my parents help with the LMI [Lenders Mortgage Insurance because the deposit is less than 20% of the loan amount].”
“If I had to come up with another $15,000 there’s no way I could afford to buy a home. I would have to keep renting for another 2-3 years.”
“We believe Michelle’s circumstances are something which will be common to most first home buyers, with the likely outcome that these buyers delay their purchasing decision and are forced to keep renting.” according to Ray White Belconnen Principal, Ben Faulks.
“In a city where vacancy rates are already below 1%, this has the potential to put a huge amount of strain on the rental market and drive rents higher” said Faulks.
“In the short term we expect to see strong activity from first home buyers looking to cash in on the scheme whilst it is still in place (up to 31st December 2012 for new dwellings), but beyond that we think that off the plan sales at the entry level have the potential to slow dramatically, putting further pressure on housing prices and the construction industry as a whole” said Faulks.