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Sydney first-home buyer stamp duty exemptions and concessions on the decline


Sydney properties are becoming more affordable as prices fall, but the number of first-home buyer stamp duty exemptions and concessions have taken a sizeable drop of more than 20 per cent in the past year, new data shows.

About 6200 exemptions and concessions were granted to first-home buyers in NSW over summer, data from Revenue NSW shows. There were 7940 issued over the same period last year.

“We have seen a bit of a drop-off in first-home buyers in the past few months,” said Domain research analyst Eliza Owen. “Even though property prices have become cheaper, in some ways it has become harder to get a mortgage [due to tighter lending restrictions].”

Last month, 1961 exemptions were granted, the lowest monthly number since July 2017, when the threshold lifted from $550,000 to $650,000 while the concession cap increased from $650,000 to $800,000.

The change boosted first-home buyer activity, Ms Owen said, prolonging price growth at the lower end of the market as the downturn took hold.

“Those who could afford to may have already utilised the policy and now we’re seeing that … drop-off,” she said.

“[But] even when we talked about a surge in first-home buyers, once investors started dropping out of the market, it was still at a relatively low level compared to some of the previous peaks we’ve seen.”

Monthly lending to first-home buyers peaked last April and has been on the decline since, the most recent data from the Australian Bureau of Statistics shows. But the proportion of first-home buyers in the owner-occupier market is still growing, with first-home buyers responsible for almost one-quarter of loans.

The number of grants issued for new homes is also in decline, with about 1770 issued over the past three months —  3.8 per cent less than the previous summer.

Sydney First Home Buyer Stamp Duty Exemptions Decline - Investors Advisors
First-home buyer couple Stephanie Nowicki and Mervin Sayseng are buying a house and land package in Riverstone in north west Sydney.

Among those looking to make the plunge are Mervin Sayseng and Stephanie Nowicki, who are buying a house and land package in Riverstone – about 48 kilometres north-west of the central business district.

“I don’t think that prices will go down much more, at least in our range,” Mr Sayseng said. “We’ve kept our budget at $650,000 … due to stamp duty concessions and how much we had saved. For established homes, [the threshold], it’s very limiting.”

Where are first-home owners buying? (March 2018 to February 2019)
SuburbPostcodeNumber of first-home owner grantsNumber of first-home duty exemptions or concessionsTotal benefits
Spring Farm2570369427$9,482,673
The most common suburb or town for the postcode has been shown. Source: Revenue NSW.

In the past year, $6.6 million was given to first-home buyers in Riverstone. The most benefits were cashed in in Liverpool, followed by postcodes covering Campbelltown, Westmead and Werrington. Of the top 20 areas, postcode 2205 — covering Arncliffe, Wolli Creek and Turella — was the closest area to the CBD.

First Home Buyers Australia director Taj Singh said most of his clients using benefits were buying entry-level apartments far from the city.

“We need these thresholds looked at. They’re so out of date in terms of the dollar value,” he said. “Even 20 to 30 kilometres out of the city, prices are well over the [stamp duty exemption] mark.”

Mr Sayseng said if the stamp duty exemption cutoff had been $50,000 higher it would have made a big difference.

“Increasing the exemption would be nice, when we were looking at housing — even around Plumpton and areas like that — if we could spend $50,000 more it was a major step up in what we could buy.”

Though house prices are falling, the average loan size to first-home buyers has been relatively flat, said Commonwealth Bank senior economist Gareth Aird.

“They’ve still got the appetite to borrow the same dollar amount,” Mr Aird said. “They’re just getting a better property now, for no more money. “

The overall appetite for finance has changed, with an ever-growing number of prospective buyers waiting to see if prices fall further.

“We as a bank are approving the same proportion of loans … the average size is the same and the approval rate is about the same. That implies the number of applications is just down,” Mr Aird said.

“All things being equal, you’d expect the number [of first-home buyer benefits] to go up, because more properties are selling under the threshold, but demand is weakening so that’s just not happening.”

Grattan Institute fellow Brendan Coates said first-home buyer benefits were an ineffective way of improving affordability because they tended to inflate prices.

“The fewer of these things being giving out is probably the better. There’s certainly no case for lifting the threshold and it would better if they were abolished entirely,” Mr Coates said.

While grants and exemptions could bring forward first-home buyer purchases and help them pull together a deposit quicker, Mr Coates said, they did not make housing cheaper.

He said it would be better if the state government abolished stamp duty for a broad-based land tax, which could boost turnover, and increased the supply of property in inner and middle-ring suburbs.

“It just takes a government that’s willing to take the risk … which neither side of politics was heading into the election.”

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