The Victorian government has scrapped stamp duty for first home buyers purchasing a house or apartment valued less than $600,000.
The new measures, which will come into effect from July, also offer discounts for properties worth between $600,000 and $750,000. The proposed policy is expected to save 25,000 first home buyers around $8,000 per year.
However, leading economist and public commentator, Saul Eslake, has said the move will actually end up harming FHBs by causing a spike in property prices.
“History shows that anything which allows buyers to pay more for a property than they otherwise would – as this proposal does – results, primarily, in people paying more for properties than they otherwise would,” he told Australian Broker
For instance, a Victorian first home buyer would have traditionally paid around $11,000 in stamp duty for a $500,000 home, meaning they were only likely to pay $489,000. With the stamp duty exemption, the same individual would be willing to pay $500,000, he said.
“Assuming that there are other prospective buyers of this property, competition among them is likely to push the price up to the $500K this would-be first time buyer is now willing and able to pay.”
The first home buyer exemption will “probably have a bigger effect in pushing up prices in metro areas than rural because there is a greater imbalance between demand and supply in metro areas,” he said.
Eslake suggested the governments get rid of stamp duty concessions and exemptions, first home buyer grants and other measures that allow FHBs to pay more than they nominally would.
Instead, he said the state governments should focus on the following areas to help first home buyers into the market:
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The changing face of first home buyers
- Push the Federal government into curtailing negative gearing and reducing the concessional rate of capital gains taxation
- Ease up on planning and building regulations which increase the cost or lengthen the time involved in building or redeveloping housing
- Free up more unused government-owned land for property developments
- Invest more in public transport and arterial roads to improve the accessibility of new housing estates to employment, recreation and entertainment