MILLIONS of dollars of government money is ripe for the picking by first homebuyers who hope to get a leg up on the property ladder. But unrealistic restrictions mean thousands just aren’t cashing in.
Across most states and territories, various forms of the First Home Owner’s Grant allow first time buyers to get a financial hand out of up to $26,000, but only for those getting into a shiny new property.
From 2000, most states and territories had enacted grant schemes that allowed first homebuyers to get a cash bonus when purchasing any residential property to live in. At the time many governments also gave tax exemptions on stamp duty transfers for eligible buyers. But, from 2012 onwards, each government has gradually limited those handouts and tax breaks to buyers of brand new dwellings only.
SO WHAT’S CHANGED?
During the 2011/12 financial year (the last 12-month period grants were given out for established properties in NSW) the State Government issued 37,427 first homeowner’s grants to a total value of $270 million. Last year the same office handed out just 8503 grants to those buying brand new homes; to a value of $123 million. And on January 1 this year the current grant also dropped from $15,000 to $10,000 for purchases under $750,000.
In Victoria, grants for the purchase of established properties wrapped up in 2013, when 32,654 grants were given out to a sum of $228 million. Over the last financial year only 10,320 grants of $10,000 were issued in the state, worth a total of $99 million. The threshold for the Victorian grant is also $750,000.
“It’s not fair and it’s not enough, in short. And the reason we say that is because it’s never been more expensive to get into the property market,” said Daniel Cohen, co-founder of First Home Buyers Australia.
The largest inequity, according to Mr Cohen, is in Sydney, where home values far out price the rest of the country. The median price in the NSW capital is now $850,000 for houses and $650,000 for units according to CoreLogic figures making the $10,000 grant for new homes less than 1 per cent of the median purchase price.
“It doesn’t make sense that the NSW government is giving out money to FHBs for properties that they aren’t buying anyway. About 70 per cent of first homebuyers don’t even buy a new property, so the grant isn’t efficient. It’s not going towards what first homebuyers need. They need help with established properties,” he said.
According to the Mortgage Finance Association of Australia there are no official figures of just how many first time buyers are currently purchasing property in Australia as previous figures were based on grant pick ups.
WHAT COULD CHANGE?
Mr Cohen is calling for a two-scaled grant system in NSW where those first homebuyers purchasing new homes receive the whole grant, while those buying an established property get 50 per cent of the grant.
“Stamp duty exemptions could also be structured this way,” he said.
Wendy Chamberlain, co founder of Amalain Buyer & Vendor Advocates, said although Victorian first homebuyers buying existing homes do get discounted stamp duty (but no cash grant) Melbourne househunters are still frustrated.
“I think that the 50 per cent off stamp duty for all first homebuyers here is great, but more still needs to be done in the way of reforms. Other incentives should be in place, irrespective of what they’re buying. I don’t think it’s a fair system at the moment, buying brand new just isn’t a viable option for all young buyers,” she said.
WHY THE FRUSTRATION?
“There’s a definite fear of over supply in the CBD off-the-plan market. Young singles and couples worry that they just won’t see any capital growth for quite a while because of the glut in inner city units in Melbourne,” Ms Chamberlain said.
“They don’t want to buy a small new apartment because when they want to start a family it’s probably not going to be suitable for their lifestyles. When they go to sell in a few years many are worried that they won’t have seen any price growth,” she said.
Ms Chamberlain said in many cases she steered her first homebuyer clients away from buying off-the-plan in the city.
“It turns out that if they want to get the grant they have to choose between a ‘dog box’ in the city and a house and land package out in the suburbs and then they’ll have to sit in the car commuting and that doesn’t work for many people either. They’re extremely frustrated, they’re throwing their hands in the air,” she said.
WHO’S THE COMPETITION?
Both buyer’s advocates say it is on the fierce auction front, when a multitude of cashed up purchasers (including foreign buyers who are restricted to buying brand new properties due to tight FIRB requirements) are vying for similar existing properties, that first-time buyers need help to compete on a level playing field.
“It’s like everyone is in the same paddling pool,” Ms Chamberlain said.
“If you go to an auction of an established property in Sydney any weekend you’ll see one first homebuyer and then multiple local and foreign buyers and investors. They’re competing with people that are not only richer and have more equity, but they’re also getting more government help than the first home buyers are. First homebuyers have no incentive anymore,” Mr Cohen said.
If Labor wins the next Federal election and subsequently restricts negative gearing benefits to newly built properties, Mr Cohen said first timers will have even more competition.
“Apartments in the cities are aimed at Baby Boomers who want lower maintenance units for retirement and they’re a lot more expensive. Traditionally, apartments used to be for young people starting out; who could only afford a unit. Now the trend is for designer developments for retirees. You’re not really seeing many low end apartments coming onto market,” he said.