Amid the current climate, to stimulate the economy, the New South Wales government announced, late July, that eligible first home buyers could access stamp duty exemptions on new homes worth up to $800,000.
Under the revised scheme, new home builds will also see stamp duty discounts available for purchases between $800,000 and $1,000,000, where the discount reduces with a higher purchasing price.
Impacts On First Home Buyer Demand
According to CoreLogic, previous research suggests that first home buyer grants and incentives have had a ‘vacuum’ effect, where first home buyer incentives are followed by large, but temporary, spikes in first home buyer activity.
This suggests the incentives bring forward purchases that may have happened anyway.
The fact that the new stamp duty discounts on offer will only be available for 12 months is likely to exacerbate this effect.
At the same time, the increased stamp duty threshold may result in an increasing demand for housing at the upper end of the price bracket.
With record low wage growth, a surge in sales for property priced between $650,000 and $800,000 may place upward pressure on house prices within this bracket which, in turn, can lead to a deterioration in the affordability measure.
With wage growth likely to remain subdued over the near term, new entrants to the market may choose to remain in these dwellings for longer.
Overall, the expected impact of this temporary change in stamp duty should bring forward the purchase of property among first home buyers, and skew more first home buyers to new property, as opposed to old, established property.
Evidence would suggest that there has been a noticeable uptick in new house and land sales in areas that fall within the revised bracket for the stamp duty concession over recent months. Following the announcement of the increased stamp duty concession, we expect this trend to be amplified.
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Bradley Wearne - General Manager & Head of Research at Meridian Australia
P: (02) 9939 3249