25 November 2010
The NSW governments announcement that the $7,000 first home owner grant will now be available for homes valued up to $835,000 up from $750,000 is welcome, but changes should have been made to other schemes too, according to the Urban Taskforce. The Taskforces chief executive, Aaron Gadiel, said the adjustment to the first home owner grant ensures that homes priced at 1.4 times Sydneys median house price will be included in the scheme. The change takes effect from 1 January 2011.
Eligibility for the first home owners grant has widened because the housing undersupply has made all homes more expensive than they need to be, Mr Gadiel said.
Logically the zero stamp duty initiative -˜the NSW Home Builders Bonus – should also have been adjusted at the same time.
Since July 1 this year, no one pays stamp duty if they are buying a home worth up to $600,000 off-the-plan in the pre-construction stage. This saves home buyers up to $22,500.
Theres also a 25 per cent cut in stamp duty for those who buy later in the development process, once construction starts or a home is newly completed. This saves home buyers up to $5,600.
Additionally, when people aged over 65 purchase a newly-constructed home worth up to $600,000, they will pay no stamp duty a saving of up to $22,500. This exemption applies irrespective of the stage of a homes construction.
For the inner and middle ring suburbs of Sydney – where the overwhelming majority of the state’s apartment development takes place – $600,000 is a low threshold, Mr Gadiel said.
In particular, it discriminates heavily against three bedroom apartments and larger two bedroom apartments which will rarely be priced below the $600,000 threshold.
The threshold is a poor means of ensuring that the scheme operates equitably.
A single person of a high or low income may be quite comfortable in a small two bedroom apartment.
However families with dependent children, on the same income, are more likely to require a larger apartment as a matter of necessity.
These buyers are currently disadvantaged by the $600,000 limits of the scheme.
The threshold should be adjusted upwards to $835,000 this would align it with the new threshold for the First Home Owners’ Grant.
The abrupt cut off at $600,000 is distorting housing supply.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
