The Victorian government has again been slammed for ‘tinkering’ with first home owner’s grants, which could prevent many from entering the property market.
According to the Real Estate Institute of Victoria (REIV), the abolition of the first home owner's grant for existing homes is a blow for a majority of buyers.
The changes have removed the $7,000 grant for existing homes while increasing the grant for new homes to $10,000, as well as reducing stamp duty by 40 per cent.
REIV CEO Enzo Raimondo said that first home buyers prefer existing homes and are now worse off, thanks to the new laws.
“A majority of first home buyers – around 70 per cent in the March quarter – prefer to choose established homes," he said.
“Right now, first home buyers benefit from $12,691 in combined government assistance on a $450,000 home. But after 1 July that will drop by $5,103.
“Assisting first home buyers by cutting their stamp duty is the most efficient and effective form of assistance, and the state government should have used its existing policy to ensure no first home buyer would be worse off under these changes.”
Elza Schilling, managing director of Noel Jones Caulfield for 20 years, told Real Estate Business that the first home owner's grant is vital to the housing market.
“The lower end of the market is going to suffer tremendously,” she said. “The young people won’t have an opportunity to secure a property.
“From the government's point of view, leaving the stamp duty as it was and keeping the grant sort of balances things out.
“So why are they removing the grant but keeping most of the stamp duty? They can’t have their cake and eat it too.”
The REIV agrees that the stamp duty cuts should have at least been increased to offset the loss of the grant.
“The stamp duty cuts committed to over two years ago should have not only been brought forward but increased to match the loss of the $7,000 grant,” Mr Raimondo said.
“From a policy perspective, it’s time to stop tinkering with first home buyer assistance. Rather than giving a grant that is less than the stamp duty bill and then changing the rules every year, they should provide a full exemption from stamp duty for all first home buyers.”