First home buyer incentive scheme update
By Greville Pabst - CEO & Director, WBP Property Valuers
Cuts to first home owner incentives were made in October; the first of a two phase reduction to the time limited boost that saw grants fall by $3,500 from the generous $14,000 on offer for first time buyers of established homes. Grants were also reduced for new dwellings, falling $7,000 from $21,000.
The added financial incentives were established in October 2008 as a supplement to the existing First Home Owners Grant in an effort to stimulate the economy and address Australia's worsening issues of housing affordability and undersupply. The initiative has received an overwhelming response from new property buyers creating significant support for the wider markets.
Figures indicate grants lead to a record 20,389 Australians entering the property market for the first time in June, a monumental increase in grant approvals when compared with last year.
Following the recent drop, however, confusion among first home buyers continues to grow with suggestions that many falsely believe grants have expired altogether. However, following the final cut to incentives on January 1st grants will revert to pre stimulus levels, offering $7,000 for both new and established properties. This does not include state based incentives such as Victoria's First Home Bonus scheme, which grants $2,000 and $11,000 for established and new properties under $600,000, respectively.
Although the grants have proven successful in stimulating activity in the market and increasing affordability for a new generation of home buyers, the number of grant approvals has already begun to decline. According to the ABS, the number of first home buyers as a percentage of total owner occupied housing finance commitments fell 0.6% in August, to 24.7%. Yet despite this inevitable decline, anecdotal evidence suggested a surge in activity prior to the October 1st deadline, with many buyers making a last minute dash to cash in on the full benefit of the grants.
Despite the cuts and the foreboding likelihood of further increases to interest rates, activity in the sector is expected to continue up until the end of the year, after which time activity is expected to stabilise.
For information about first home buyer grants in your state, see the following links: