By Jonathan Chancellor Monday, 29 April 2013
Following the decision among other east coast states, the Victorian first-home owner grant will increase from $7000 to $10,000 for newly constructed homes.
It takes effect from July 1, which will lead to a probable pause in the purchase of new houses and apartment over the next two months.
But there will be a rush – possibly even an unhealthy frenzy – from those first timers desirous of buying established homes as they will no longer receive the existing $7000 first home grant from July.
But all first-home buyers will benefit from fast-tracked stamp duty savings, which will increase from 30% to 40% on homes valued up to $600,000, six months ahead of schedule. It is part of the Liberal government’s pre-election pledged to reduce stamp duty by 50% over four years with the final 10% reduction scheduled for September 2014.
The combination of a $10,000 First Home Owner Grant and stamp-duty cut means a $16,500 saving on a $400,000 new property.
“The average price of a newly constructed first home is about $400,000,” Victorian Treasurer Michael O’Brien said yesterday.
Michael O’Brien forecast the decision would help create more jobs in the housing sector. The Victorian budget on May 7 will be the first under the new Premier Denis Napthine.
“Targeting the grant to newly constructed homes – whether in regional Victoria, Melbourne’s growth corridors or new CBD apartments – will stimulate the economy and create jobs in the construction sector,” Mr O’Brien said.
But Melbourne buyers agent Frank Valentic says it was “bad news” given the 80% of first home buyers who buy established property will no longer get $7000 grant from July 2013.
Mr O’Brien said ending the first home grant for established houses brought Victoria into line with other states.
The Herald Sun reported the Master Builders Association of Victoria executive director Brian Welch saying increasing the grants would encourage people to consider building sooner.
“The industry’s been in decline for the last couple of years, so this will give us a welcome boost,” he said.
But the Real Estate Institute of Victoria’s chief executive Enzo Raimondo says the changes mean those purchasing existing homes will be subsidising a discount for those buying newly constructed homes.
“History has shown first home buyers generally buy established [homes],” Mr Raimondo told the ABC.
“They generally want to buy close to where they work, and in Melbourne that’s inner and middle suburbs, so this is going to make it a bit more difficult for first-home buyers of established properties in Melbourne.”
The Victorian decision follows NSW where first home buyers have gone awol, leaving the O’Farrell Government with a budget savings windfall given the dramatically reduced take-up of new home acquistion by first time buyers.
Victorian first home buyers have been relatively steady over the past year with established home purchasers. Last month there were 1714 Victorian recipients securing $11.99 million in grants for established homes. There were 1652 in March last year.
For new home acquisitions there were 856 recipients in Victoria securing $5.99 in grants last March compared with 814 securing $5.69 million in grants in March 2013.
The NSW $7 000 first home owner grant for established properties ended on 30 September 2012. The scheme established to assist first home owners instead to purchase or build a new home offers a $15 000 grant from 1 October 2012.
The FHOG (New Homes) grant will reduce to $10,000 on 1 January 2014.
But alarmingly NSW first home grants recipients have fallen from 2631 securing $18.77 million in March 2012, to this March when there was a record low 624 recipients securing $6.77 million.
Queensland closed its $7000 basic grant scheme last October, replacing it with a $15,000 grant for new homes. With just 217 grants recorded in the December quarter, the government website argues it will take several months before the impact of the Great Start Grant (previously known as the first home owner construction grant) can be clearly assessed, allowing for the lag between signing a contract and construction to build a home.
There had been a typical 4500 recipients in prior December quarters.
Latest State Government figures show that in the six months to March 28, there were just 805 first-home owners who received a $15,000 helping hand.
Launched in October 2012 as the First Home Owners Construction Grant, the funds are now only available to build or buy a new house, townhouse or apartment valued at less than $750,000.
It replaced the decade-old First Home Owners Grant, which had been available for the purchase of new or existing properties in Queensland.
The Brisbane Courier Mail recently reported the Real Estate Institute of Queensland CEO Anton Kardash said the Government had pulled the wrong lever as he had predicted.
“They persisted, and unfortunately the data is coming back as we predicted – and that is people are not transitioning to buying new homes with these grants.”
The REIQ suggested new homes are usually too expensive for first-time buyers and are often in outlying suburbs where young people do not necessarily want to live.