The Real Estate Institute of Victoria (REIV) has said that the abolition of the $7,000 First Home Owners Grant from 1 July is a blow for the majority of buyers planning to purchase a home. Whilst first home buyers would benefit from the earlier start to the 40% stamp duty cut, those buying an existing home would be worse off.
Reduction in assistance for established homes
The majority of first home buyers – around 70 per cent in the March quarter – prefer to choose established homes.
Right now, first home buyers benefit from $12,961 in combined government assistance on a $450,000 home, but after July 1 that will drop by $5,103.
Assisting first home buyers by cutting their stamp duty bills is the most efficient and effective form of assistance and the state government should have used its existing policy to ensure no first home buyer would be worse off under these changes.
The stamp duty cuts committed to over two years ago should have not only been brought forward but increased to match the loss of the $7,000 grant.
Full stamp duty exemption is needed
From a policy perspective, it’s time to stop tinkering with first home buyer assistance. Rather than giving a grant that is less than the stamp duty and then changing the rules every year, they should provide a full exemption from stamp duty for all first home buyers.
The REIV welcomed the cessation of the special assistance for new home buyers in last year’s budget because higher levels of housing supply meant the stimulus was no longer needed.
Many first home buyers spend years saving a deposit and end up spending a significant amount of it on stamp duty. The cuts to stamp duty are welcome but should be increased to 100%.
In the short term – between now and 30 June – the changes should lead to an influx of buyers with people seeking to take advantage of the $7,000 grant before it ends. Those purchasing homes in this time with a settlement date post July 1 will also be able to qualify for the 40% stamp duty savings.
For those first home buyers looking to purchase new homes valued under $750,000, the $7,000 grant will increase to $10,000 post July 1.
To find out more, visit the REIV website which outlines the government assistance which may be available to you.