How will the changes announced by NSW Premier, Gladys Berejiklian play out? Last week the Premier announced new measures to help first home buyers into the NSW property market.
In summary the government has extended the First Home Buyer Stamp Duty concessions to existing properties, not just new properties. The threshold has also increased from $650,000 to $800,000, catching considerably more properties in the net. They have also increased the stamp duty on foreign investors to fund the move and to boost first home buyers' advantage in the competition for a property. There has not been a change to the grant of $10,000 announced.
There should be a few results from these changes.
Firstly, the entry costs for first home buyers will be reduced considerably meaning their ability to save a deposit and compete in the market will be enhanced. Outside of the Sydney market this will have a huge impact as $650,000 - $800,000 goes a long way! Extending the grant to existing stock is a massive change.
Secondly, for those first home buyers looking to purchase in the $800,000-$950,000 purchase price bracket the flow on effect should be reduced competition from other first home buyers that are now looking to take advantage of the change.
Thirdly, foreign investors will look at other markets which aren't as expensive to buy into. Fortunately for NSW, Victoria are ending their off the plan stamp duty concessions at the same time and Queensland have a surcharge on foreign investors.
Finally, one of the affordability factors we are facing is due to lack of supply. The federal government as worked with APRA and ASIC to tighten up prudential regulations for local and foreign investors to make investing considerably more expensive than just 6 months ago, with close to a 25% increase in interest rates over that period. The federal government has also introduced the vacant apartment tax. These measures along with the state government changes to the grant and the foreign stamp duty will mean fewer investors and first home buyers purchasing existing stock. If this drop in demand is significant then new apartment complexes will put on hold or pulled and fewer developments proposed. This will increase prices and rents in the medium to long term.
All said, there is a window of opportunity opening on 1st July for first home buyers to get into the market and compete effectively with investors. It may not stay open for long, but it will definitely help in the short term.