The abolition of the $7,000 grant for established homes in Victoria could be a blow for first home buyers, according to a property industry expert.
National Property Buyer’s Catherine Cashmore told Smart Property Investment that instead of improving housing affordability, changes to the state’s first home buyer’s grant would increase property prices across the board.
“Nobody should ever be fooled that it’s got anything to do with affordability because time and time again, it’s proven to cause price increases, not decreases,” she said.
"In fact, any benefit from the first home owner's grant and affordability is more than stripped away when you have price increases because what happens is that it stimulates the bottom end of the market. As soon as you feed money into the bottom end of the market, it has a price multiplier across the market as a whole."
The $7,000 grant, which will be replaced by a $10,000 grant for newly constructed houses and apartments under $750,000, will take effect from 1 July 2013. Stamp duty cuts will also increase from 30 per cent to 40 per cent for homes valued up to $600,000.
In a move to promote housing construction, the first home owner's grant on newly constructed properties will bring Victoria into line with New South Wales, Queensland and South Australia.
“These reforms will boost jobs in our housing and construction industry and boost the level of new housing stock to take pressure off housing affordability, especially for young Victorians looking to buy their first home,” treasurer Michael O’Brien said.
“Victoria has a large and growing population and this announcement demonstrates the coalition government’s determination to build for growth and strengthen Victoria’s economy.”
According to Real Estate Institute of Victoria, first home buyers purchasing a $450,000 home before June 30 will benefit from $12,691 in combined government assistance, but buying after this date will reduce this to $5,103.
While first home buyers would benefit from the stamp duty cuts, which were brought forward, REIV chief executive Enzo Raimondo said more needs to be done.
“Assisting first home buyers by cutting their stamp duty 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," Mr Raimondo said.
“Rather than giving a grant that is less than the stamp duty bill and then changing the rules every year, they should provide a full exemption from stamp duty for all first home buyers.”