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Stamp duty tweaks for first home buyers

By johnboy 1 June 2013 32

Happy news for everyone waiting until the investors get burned before getting into the real estate market.

Andrew Barr has announced stamp duty concessions:

The ACT Government Home Buyer Concession Scheme (HBCS) provides a discount on stamp duty for eligible households purchasing a new property as their principal place of residence. As long as the purchaser meets the eligibility criteria including the income test, a discount is provided.

From 5 June 2013, the income limit will be further increased from $150,000 to $160,000 per household. Under this reform, an estimated 70 per cent of Canberra households will be eligible for the concession against this criteria. Properties worth under $425,000 will only incur Stamp Duty of only $20. Properties between $425,000 and $525,000 will pay a discounted duty.

A purchaser can also be eligible for both the First Home Owners Grant and HBCS. For example, an eligible first home buyer who purchases a house and land package worth $415,000 will pay only $20 in Stamp Duty and will receive a $12,500 cash payment.

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Stamp duty tweaks for first home buyers
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Genie 6:34 pm 03 Jun 13

devils_advocate said :

Genie said :

Bit of a bummer for myself… I start construction this month… The extra $5,500 would of helped. However the stamp duty concession has been an amazing help… Means I didn’t have to save for another 12 months to have the $20k duty up front before I could buy property..

Don’t feel too down about it. The extra demand, and resulting price increase, generally makes up for the free cash (and arguably, then some). You’ll probably end up about the same or slightly better off.

Ahh I’m not too fussed… Already getting $7k and the concessional stamp duty rate is already making a significant difference. As I already said – Not having to fork out $20k in stamp duty means I could purchase property 12 months earlier.

My mortgage will be cheaper than renting, hooray !

devils_advocate 11:43 am 03 Jun 13

Genie said :

Bit of a bummer for myself… I start construction this month… The extra $5,500 would of helped. However the stamp duty concession has been an amazing help… Means I didn’t have to save for another 12 months to have the $20k duty up front before I could buy property..

Don’t feel too down about it. The extra demand, and resulting price increase, generally makes up for the free cash (and arguably, then some). You’ll probably end up about the same or slightly better off.

EvanJames 10:18 am 03 Jun 13

EvanJames said :

Tetranitrate said :

Grail said :

arescarti42 said :

milkman said :

no you just got to buy a property that was around half the price (in real terms).

Much like their incomes at the time.

Wrong.
Prior to the mid 90s you could buy the median house for 3x the median income. Now the median house is 5-7x the median income depending on which city you live in.
House prices have massively outstripped incomes.

House prices are quite adequately tracking the 3x household income line. It’s not the baby boomers, it’s the multi-income families. As buying power increases, prices increase to match.

You’re pulling this out of your arse. The ratios quoted ARE household incomes. When ‘median income’ is quoted it’s pretty much always median household income.
Therefore multi-income families are already accounted for
– not that it matters, you’ve already shown yourself happy to pull ‘facts’ out of your arse to support your position ex post facto, so I’m sure you can find more where that one came from.

The median income figure Grail was using was income, wages, not household income. The current “household income” is a collection of two incomes, plus any tax breaks/government payements, which these days can be considerable.

It’s a different figure. House prices might well “only” be 3X the median “household income” but that household income is way bigger than the previous bare personal “income”.

And is it really necessary to sling insults at the person you’re disagreeing with?

Edit: not sure what the quotes are doing, the last lot didn’t “quote”. How frustrating. Let’s see if this fixes it.

EvanJames 10:15 am 03 Jun 13

Tetranitrate said :

Grail said :

arescarti42 said :

milkman said :

no you just got to buy a property that was around half the price (in real terms).

Much like their incomes at the time.

Wrong.
Prior to the mid 90s you could buy the median house for 3x the median income. Now the median house is 5-7x the median income depending on which city you live in.
House prices have massively outstripped incomes.

House prices are quite adequately tracking the 3x household income line. It’s not the baby boomers, it’s the multi-income families. As buying power increases, prices increase to match.

You’re pulling this out of your arse. The ratios quoted ARE household incomes. When ‘median income’ is quoted it’s pretty much always median household income.
Therefore multi-income families are already accounted for
– not that it matters, you’ve already shown yourself happy to pull ‘facts’ out of your arse to support your position ex post facto, so I’m sure you can find more where that one came from.

The median income figure Grail was using was income, wages, not household income. The current “household income” is a collection of two incomes, plus any tax breaks/government payements, which these days can be considerable.

It’s a different figure. House prices might well “only” be 3X the median “household income” but that household income is way bigger than the previous bare personal “income”.

And is it really necessary to sling insults at the person you’re disagreeing with?

Genie 9:13 am 03 Jun 13

MrPC said :

Where does the $12,500 cash payment figure come from? The ACT revenue site clearly says the first home builders grant is $7k and the first home owners boost ended years ago.

Is this something about the cash back arrangements for landscaping, solar hot water, and ducted heating systems? Those don’t add up to $5.5k.

I thought this too… A quick google search comes up with this article

http://www.abc.net.au/news/2013-06-01/act-boosts-first-homeowners-grant/4727342?section=act

It states the $12,500 comes into effect in September…

Bit of a bummer for myself… I start construction this month… The extra $5,500 would of helped. However the stamp duty concession has been an amazing help… Means I didn’t have to save for another 12 months to have the $20k duty up front before I could buy property..

arescarti42 9:00 am 03 Jun 13

milkman said :

The only way for house prices to crash is massive unemployment. Even with the proposed ‘slash and burn’ of the PS, I think a genuine crash is unlikely. Look to the 1990s for a good example of what happened last time.

House prices in Canberra fell by 7% in the first two years of the Howard Government’s first term, and they were dirt cheap to begin with (comparative to now).

Consider that now people are massively more indebted than they were in the 1990s, that prices are at completely ridiculous highs, and that there’s a big glut of housing in Canberra at the moment, and then draw your conclusion.

milkman 6:56 am 03 Jun 13

Tetranitrate said :

milkman said :

Interestingly, it’s a lot more common for both adults in a household to work now. Couple that with lower interest rates than the 90s and you get what we have now.

Interest rates aren’t actually low by historical standards now, it’s just that they were high in the 80s and early 90s. Interest rates were pretty similar to what we have today in the 50s and 60s, and were actually well bellow inflation for most of the 70s. The rates borrowers faced were pretty much around 4-6% from the 1930s to the mid 70s. The anomaly isn’t now, it’s ~1975-1997 or so.

Differences are that now banks will lend half a million dollars at the drop of at hat, whereas once upon a time you’d have needed a 20 or 30% deposit.
Not helped by:
-combination of negative gearing and very generous capital gains tax arrangements that encourage investors to pay way more than is justified based on rental cashflows and also encourage landbanking and speculative vacancies.
-idiotic grants to first home buyers that do nothing but push prices higher. Added to a deposit $7000 becomes an extra $60k or more even at ‘reasonable’ loan to value ratios, and people can still get stupid ratios like 95% and even 97% with mortgage insurance. Now consider that grants have been at times as high as 21k when boosted. The 21k at the height of the post GFC stimulus would have boosted the borrowing power of some buyers by as much as $400,000 compared to what they could have borrowed with no grants (because requirements for genuine savings are also waved at the drop of a hat) – we could have had a reasonable correction back in 2009, but instead the government poured gasoline onto the fire.
-restrictive planning systems and councils front-loading costs onto developers. Drip feeding of land onto the market. Now Melbourne and Adelaide are toying with urban growth boundaries.

Agree about interest rates.

Negative gearing and CGT is a different story, though. The feds lose about $2.6B a year through NG concessions, but gain around $10B per year in CGT from residential property investors selling their investments. Also, CGT was only halved because indexing is removed, so longer term investors are actually punished.

I also agree about handing out grants, and drop feeding land (which I think is the biggest culprit in Canberra).

dungfungus 8:45 pm 02 Jun 13

bigred said :

Very clever proposal this. Being a home owner I am far from happy, but for the next generation and the struggling building industry it is very good. First thing from Andrew Barr that I have agreed with.

If Canberra people are the most educated and smartest in the country as the surveys repeatedly tell us, I think that they will see this “gift” of $12,500 and waiving of stamp duty for what it is namely, unjustified support for the rapacious building industry that has evolved in the Territory.
New home buyers who don’t do their sums to see where they may be in 5 years if they commit to buying a new home on minimum deposit – maximum term – variable rate interest will become cannon fodder for the unscrupulous builders who have already wiped out a lot of sub-contractors and tradesmen through their recent business failures.

bigred 7:37 pm 02 Jun 13

Very clever proposal this. Being a home owner I am far from happy, but for the next generation and the struggling building industry it is very good. First thing from Andrew Barr that I have agreed with.

dungfungus 6:35 pm 02 Jun 13

milkman said :

Grail said :

arescarti42 said :

milkman said :

no you just got to buy a property that was around half the price (in real terms).

Much like their incomes at the time.

Wrong.

Prior to the mid 90s you could buy the median house for 3x the median income. Now the median house is 5-7x the median income depending on which city you live in.

House prices have massively outstripped incomes.

House prices are quite adequately tracking the 3x household income line. It’s not the baby boomers, it’s the multi-income families. As buying power increases, prices increase to match.

Interestingly, it’s a lot more common for both adults in a household to work now. Couple that with lower interest rates than the 90s and you get what we have now.

The only way for house prices to crash is massive unemployment. Even with the proposed ‘slash and burn’ of the PS, I think a genuine crash is unlikely. Look to the 1990s for a good example of what happened last time.

Bear in mind that 40 years ago before home loans were deregulated, a borrower had to have one third deposit and a proven record of saving and repayments could not exceed 25% of net income of the family breadwinner. This meant fewer homes were built “on spec” as they are now.
These days, home loans can be obtained without a deposit contribution and this has the effect of leveraging up house prices through demand. Repayments are also geared to two incomes as has been pointed out so much larger amounts can be borrowed.
Subsidizing new home buyers into home loans they may not be able to service is not smart. One only has to look what happened in the USA a few years ago when renters were turned into borrowers through government policies, lax credit approvals and ridiculously cheap interest rates for the first couple of years.
A good old fashioned credit squeeze will create mayhem in Australia if economic conditions deteriorate further.

Tetranitrate 6:30 pm 02 Jun 13

milkman said :

Interestingly, it’s a lot more common for both adults in a household to work now. Couple that with lower interest rates than the 90s and you get what we have now.

Interest rates aren’t actually low by historical standards now, it’s just that they were high in the 80s and early 90s. Interest rates were pretty similar to what we have today in the 50s and 60s, and were actually well bellow inflation for most of the 70s. The rates borrowers faced were pretty much around 4-6% from the 1930s to the mid 70s. The anomaly isn’t now, it’s ~1975-1997 or so.

Differences are that now banks will lend half a million dollars at the drop of at hat, whereas once upon a time you’d have needed a 20 or 30% deposit.
Not helped by:
-combination of negative gearing and very generous capital gains tax arrangements that encourage investors to pay way more than is justified based on rental cashflows and also encourage landbanking and speculative vacancies.
-idiotic grants to first home buyers that do nothing but push prices higher. Added to a deposit $7000 becomes an extra $60k or more even at ‘reasonable’ loan to value ratios, and people can still get stupid ratios like 95% and even 97% with mortgage insurance. Now consider that grants have been at times as high as 21k when boosted. The 21k at the height of the post GFC stimulus would have boosted the borrowing power of some buyers by as much as $400,000 compared to what they could have borrowed with no grants (because requirements for genuine savings are also waved at the drop of a hat) – we could have had a reasonable correction back in 2009, but instead the government poured gasoline onto the fire.
-restrictive planning systems and councils front-loading costs onto developers. Drip feeding of land onto the market. Now Melbourne and Adelaide are toying with urban growth boundaries.

justsomeaussie 5:41 pm 02 Jun 13

When will people learn that stamp duty concessions only make the situation worse.

They artificially inflate the price of the homes by increasing demand without doing anything about supply. Thereby pushing prices higher.

Stamp duty concessions don’t end up in a better situation for the buyer, only a better situation for the seller.

The extra cash saved is simply added to the top of the price thereby giving more money to the seller of the property not the buyer.

And ask yourself this: why do 70% of Canberrans need a concession?

What we should be doing is encouraging people own multiple investment properties to sell. This frees up the bottom end of the market for people to enter.

All he government is doing is pushing housing prices higher and higher and MORE out of reach for new home buyers.

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