The State Government have decided that first home owners need more help to get into the market place. By reducing stamp duty payable on their purchasers from 50% to nil on purchasers at or below $600,000 and a reduced stamp duty on properties up to $750,000, the new savings on a $600,000 home for first home buyers will be around $15,000. The government has also doubled the first home owners grant (FHOG) for those who buy new homes in regional Victoria.
So far, this announcement has been made by the politicians on radio, TV and in the print media but there has been little, to no detail to follow this up. The press releases say this will start on July 1 2017. But nothing has been said as to whether this is the contract date or settlement date. If it is the latter, then every first home owner will be trying to delay settlement until after July 1 and if it is the purchase or contract date then we will see most first home owners stop purchasing property until July 1st.
This means there will be there will be a decrease in demand for homes under $600,000 until July and then a massive upshot in July and August. Whenever the first home buyers are given more money the price of homes that are being targeted, such as family homes in new estate suburbs will traditionally increase by approximately 3 times the savings being offered. On a $600,000 home the savings to a first home buyer will be approximately $15,000; so I expect to see a rise in price of those homes to be approx. $45,000. Basically, if the purchaser has an extra $15k then they can usually borrow 3-4 times that from the bank. If you have $100,000 in savings, then the bank will normally lend you between 3-5 times this amount. ($300,000 – $500,000) depending on your income. So, if you have an extra $15,000 then potentially a bank will lend you $45 – $75k more. AND IF YOU HAVE MORE MONEY AT YOUR DISPOSAL THE AVERAGE PERSON WILL USE IT IN THEIR PURCHASE.
And don’t think for one second the government don’t know this. Only around 13% of buyers are first home buyers, so the other 87% will end up paying up to 10% more for their properties and therefore up to 10% more in stamp duty. This the only winner here is the state revenue office.
Director JPP Buyer Advoactes