Stamp duty cuts hurt first-time home buyers

Michael Bleby reported in the Australian Financial review on April 7, 2018, that recent Stamp Duty cuts have hurt first time home buyers

(Original: http://www.afr.com/real-estate/first-home-buyers-battle-higher-prices-prompted-by-last-years-stamp-duty-cuts-20180405-h0yepj).

The key points from this article were:

• First home buyers have more money available, but that’s pushed up prices.
• Political leaders in two biggest states accused of simply playing politics.
• Stamp duty cuts made last year to help first home buyers in Victoria and NSW are making it harder for them by pushing prices higher.
  
  

He went on to report the following:
Stamp duty cuts for first home buyers made by the Victorian and NSW governments in July last year are now coming back to harm the very home buyers those state’s political leaders said they were designed to help.

The stamp duty change, which eliminated the transaction tax on homes worth up to $600,000 and cut it on prices up to $750,000 was a disaster for Ms Lev, said her buyers agent Julie DeBondt-Barker.

‘‘It made it worse,’’ Ms DeBondt-Barker said. ‘‘She’s always chasing it.’’

Australia’s east-coast dominated housing market is slowing and prices are falling overall in the two largest cities. NAB, the fourth-biggest residential lender on Friday predicted a national fall of 0.8 per cent in house prices, reversing its earlier expectation of 0.7 per cent gain. But in Melbourne, while prices have flattened in blue-chip areas, the picture was very different in more affordable suburbs, Ms DeBondt-Barker said.

‘‘If you go to Epping, Werribee, Tarneit, Cranbourne – Frankston’s gone nuts – if you go to the outer suburbs, the only ones first home buyers can get into now, it’s absolutely soaring and is still going up,’’ she said.

The policy does assist some buyers in the first instance by cutting the stamp duty bill they have to pay on their purchase. On a home with a price tag of $650,000, for example, stamp duty is cut from $34,070 to $11,356, giving the buyer more money to spend up front. For a property costing $600,000 the $31,070 bill they would otherwise pay is eliminated. But that – along with other policies such as first home buyer grants – simply means the first group of buyers have more money to throw at vendors, pushing the overall market higher for subsequent waves of buyers.

Ms DeBondt-Barker, a principal of Buyers Home Base, says political leaders of the two largest states were just playing politics and not genuinely trying to help first-time buyers.

‘‘It was a political move, if anything,’’ she said. ‘‘Anybody in the field thought ‘That’s ridiculous, it’s never going to work’. It was obviously going to go this way.’’
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You can read the full article here: http://www.afr.com/real-estate/first-home-buyers-battle-higher-prices-prompted-by-last-years-stamp-duty-cuts-20180405-h0yepj.