FHOG a Double Edged Sword
By Peter Sarmas on 23 Apr 2013
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Ahead of their state budget, the Victorian Government announced changes to the First Home Owner Grant (FHOG) as well as further concessions to stamp duty.
According to the government, first home owners purchasing a newly constructed house or apartment will receive a $10,000 cash grant, effective July 1. This is up from the current $7,000 bonus on new and established homes.
In addition, stamp duty concessions for all first home purchases will increase from 30 per cent to 40 per cent, up to $600,000.
Treasurer Michael O’Brien said the changes are a much needed leg-up for Victorians struggling to enter the property market. “The average price of a newly constructed first home is about $400,000,” Mr O’Brien said. “With these announcements, Victorian families will be over $16,500 better off with the combination of the increased grant and the stamp duty cuts.”
Mr O’Brien added that the new legislation will boost housing construction and create new jobs in the Garden State. “We acknowledge the housing construction industry is a really important employer of people in this state. We want to see that grow. We want to see more jobs and we also want to make sure we have more housing stock to meet the needs of a growing population.”
Additionally, the government announced that it will scrap the current FHOG for established home purchases from July 1, bringing Victoria’s FHOG legislation into line with the similar FHOG’s of NSW and Queensland.
In response, Real Estate Institute of Victoria (REIV) chief executive Enzo Raimondo said the government’s decision to cut the FHOG on established property purchases is disappointing, but expected. “The majority of first home buyers – around 70 per cent in the March quarter – prefer to choose established homes. 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.”
“From a policy perspective, it’s time to stop tinkering with first home buyer assistance,” said Mr Raimondo. “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.”
As a result of the government’s announcement, the impact on housing will be two-fold over the coming months. Purchases on new houses in Victoria are likely to halt as buyers pause until the FHOG changes to take effect, while on the flipside, established homes are expected to experience a buying frenzy as first timers seek to secure the outgoing $7,000 grant over the next two months.
