In July 2000, the First Home Owner Grant Scheme (FHOGS) was established to offset the impact of the Goods and Services Tax (GST) and assist eligible first home owners to purchase a new or existing home. According to the ABS, first home buyers are typically aged between 25-34, and prefer higher-density living. At this age, incomes are limited and cost of living is growing, therefore, the grant aims to ease the financial burden of prospective first home buyers. The grant does vary from concessions on state stamp duties to additional grants purchasing regional areas.
The following report will discuss the first home buyer grant per state government and identify the properties available for first home buyers within each states threshold.
Median dwelling prices are sourced from BIS Shrapnel, Domain Group, Realestate.com.au. Information on the First Home Owner Grants are sourced from each states government website.
New South Wales
The median house price is Sydney over $1.1 million. In acknowledgment of Sydney’s rising property prices, the NSW Government developed a new set of measures in an effort to make it easy for First Home Buyers to enter the property market. From 1 July 2017, stamp duty for new and established homes valued up to $650,000 has been abolished; and there are concessions on stamp duty for properties up to $800,000.
Even with this grant, properties valued under $650,000 and located in close proximity to the CBD are few and far between. With the median house price within a 10-kilometre radius of the CBD above $2 million, a first home buyer’s choice of location is limited. In fact, according to the Domain Group, the median house for property located even 25km+ is $770,000, only enough to receive a minor stamp duty concession.
To secure a brand new property and receive the stamp duty exemption, first home buyers will need to purchase in areas over 60km away from the Sydney CBD. Some areas include Penrith, Campbelltown and where median house prices range from $600,000-700,000. In these suburbs, a first home buyer can purchase a brand new 4 bedroom house and be eligible for the full government incentive.
For apartments, the median price of property located 25km+ from the CBD was measured at $620,000. Therefore, options are available in suburbs closer to Sydney CBD such as Parramatta, Punch-bowl, and Hornsby. As at August 2017, numerous 2-bedroom units are being sold ranging from $600,000 - $650,000. However, quality should be considered.
Whilst these properties are relatively close to the city, they are well over 10 years old and may require repair work or renovation.
While the FHOG and stamp duty exemption could save first home buyers up to $34,000, with prices as they are, purchasers have little choice unless they are willing to buy over 40km away from the Sydney CBD.
From an investment perspective, it is essential for those considering utlizing the FHOG to purchase their first home to do their research and seek guidance from an appropriately qualified professional.
Between 2008 and continuing up unto the present, Sydney median house prices have experienced exponential growth all the while, wage growth has remained subdued. The combined effect of this has seen as substantial deterioration in the affordability measure, with 43% of household incomes beings spent towards a mortgage.
In acknowledgement of the above, investors seeking to take up the first home owners incentive in the present climate will be subject to higher mortgage repayments which will likely reduce the ability to generate savings, thus proving to be a costly endeavour.
Over the last decade, Melbourne’s property market outperformed Sydney, and has resulted in a similar deterioration in the affordability measure. In acknowledgement of the impact this holds over those whom are looking to enter the property market for the first time, the Victorian government abolished stamp duty for property valued up to $600,000, and stamp duty concessions are available on properties up to $750,000. Additionally, the state government introduced a $20,000 grant for new homes located in regional Victoria, valued up to $750,000. This initiative came into effect as of July 1, 2017.
At March 2017, the median unit price in Melbourne was $532,700. This would imply that there is substantial opportunity for first home buyers to purchase this dwelling type within this market. Suburbs of interest for buyers includes Clayton, Glenroy and Essendon which have a median unit price of $515,000, $465,000 and $470,000, respectively. In these suburbs, first home buyers can purchase a brand new 1 bedroom apartments within 20km of the Melbourne CBD.
The latest policy, a $20,000 grant for homes purchased in regional Victoria, aims reduce congestion issues by spreading the metropolitan population into regional Melbourne.
Consequently, there has been a spike in interest in regional areas such as Geelong, Yarra Glen, and Sunbury; where median house prices of $630,000, $580,000 and $420,000, are observed respectively (March 20107- RP data). Much like Sydney, these are areas over 40km away from the CBD. Both Melbourne and Sydney predominately city centric, meaning that the majority of job growth is concentrated within the CBD’s. In the absence of employment nodes in these areas, it is questionable whether the $20,000 grant will be of such significance to entice migration to these areas.
As at 2012, First home buyers in Queensland were eligible for a $20,000 First Home Owners Grant (FHOG) when purchasing a new property valued at less than $750,000. In the 2017 budget, the Queensland Government decided to extend the current FHOG.
Between 2008 and 2015, the Brisbane property market experienced a correction in median whereby median house prices increased by 12%. Consequently, Brisbane has experienced a significant improvement in the affordability measure. As at March 2017, the median house price was $544,200; this is well under the $750,000 threshold required to be eligible for the FHOG. With this in mind, first home homeowners in Brisbane can comfortably purchase brand new 4-bedroom house within 20km of the city and be entitled to the entire grant. Similar conditions were observed in Sydney and Melbourne in 2010 and 2014, respectively.
As for apartments, the most expensive suburb is Hamilton, with a median unit price at $430,400. With house and unit prices at a comparatively affordable level, Brisbane is attracting first home buyers, owner-occupiers and investors. According to BIS Oxford Economics, Brisbane has experienced a slight uptick in the number of first home buyer and change over buyer loans over March quarter 2017, while investor loans have been steadily increasing since March 2008.
Australian Capital Territory
In January 2016, the ACT’s FHOG was reduced from $10,000 to $7,000 and is only applicable to new or substantially renovated property valued under $750,000.
As at March 2017, the median house price of Canberra was $657,300, making it the third most expensive city in Australia. Within 5km of the Canberra CBD’s suburbs have median house between $785,000 – $2.52 million. Since the government grant only applies to brand new or substantially renovated property, first home buyers will need to purchase relatively far away from the CBD if they are intent on purchasing a house.
Examples of opportunities can be identified in Calwell and Macgregor; suburbs located 15km which have median house price of $543,000 and $462,000 respectively.
As at March 2017, the median unit price has reached $422,000. Over the past 8 years, Canberra has been hit with record levels of unit construction. Consequently, unit prices have increased a by 12.5% over the period. At present, the current median unit price allows first home buyers the option to buy brand new 2-bedroom apartment within 5km of Canberra CBD.
Due to recent downturn in mining and resource sector, Western Australia is currently facing economic headwinds. In an effort to reel in budget spending and allow for redistribution of funds to projects aimed at stimulating the economy, the WA government changed to the closing date of the $10,000 FHOG on properties valued up to $750,000 from December 2017 to June 2017. Shortening the grant allowed the State Government to fund an extra $20 million into higher priority areas.
Median house prices of the coastal suburbs of Perth such Burns Beach, Hillarys and Swanbourne range from $860,000 to $1.76 million, therefore no grant is available. As at March 2017, the median house price of Perth was $538,700. Accordingly, those seeking the first home owners grant will have to sacrifice proximity to the beach order to receive the $5000 grant. Affordable suburbs around the CBD include Herne Hill and Thornile where median house prices range from $393,000 to $400,000.
With the median unit price currently $405,800, first home buyers interested in purchasing apartment have a plethora of options. Coastal suburbs, such as Scarborough and North Beach, are within the government threshold with a median 2-bedroom unit price of $466,000 & $525,000, respectively.
Interestingly, Darwin was the highest performing city from 2004-2014, growing 201% in the 10-year period (BIS Oxford Economics). As at 2014, the median house price in Darwin was $620,800. Consequently, the affordability measure was strained and first home buyers were priced out of the market. To combat this, the Northern Territory Government removed the $600,000 threshold on the current grant. As at 2015, First Home Buyers will receive a $26,000 grant when purchasing a new or established property valued at any price.
Currently, he median house price of Darwin is $591,000, this equates to a decrease of 5% since 2014. With no price threshold on the government grant and strengthened affordability, first home owner’s choices have improved. As at December 2016, the median inner-city house price was $720,000 and therefore largely unaffordable option for First Home buyers. However, while inner city houses are out of reach for first home buyers, suburbs as Moulden, Gray, and Driver are located approximately 16km away from the CBD, and have a median house price of 346,000, $410,000 and $425,000, respectively, representing a viable option.
The South Australian government currently has multiple incentives in place for first home buyers. As at October 2012, first home buyers are eligible for a $15,000 FHOG for new home purchases valued up to $575,000.
Off The Plan stamp Duty Concession
Full stamp duty concession on transfer of new or substantially refurbished apartment capped at stamp duty payable on a $500,000 apartment. Applies to purchases of apartments within the City of Adelaide, Bowden Village, and area known as 45 Park, Gilberton. Partial stamp duty concession for apartments up to 30 June 2017.
Additionally, those who purchase off-the-plan apartment property before September 30th 2017 are eligible for a $10,000 per-construction grant for new properties valued up to $575,000 ( applicable to purchases within pre-difined areas of the CBD) . By purchasing an off-the-plan property valued under the threshold, First Home Buyers can potentially reduce their capital outlay by up to $25,000.
The median house price in Adelaide is $452,000. Much like Perth, prospective home buyers have limited choice for coastal suburbs. When looking inland, first home buyers can purchase a brand new 3-4-bedroom house located within 13km of the CBD, and still receive up to $25,000 from government grants. Areas include Port Adelaide and St Agnes, which have a median house price of $400,000, and 408,000, respectively.
For further information, please visit: http://www.revenuesa.sa.gov.au/grants-and-concessions
Reflecting a low level of income and minimal employment drivers, Hobart has the lowest median house price of the state capitals at $414,2006. First home buyers in Tasmania are eligible for the $20,000 FHOG grant when purchasing new property. In addition to this, there is no cap applicable to the value of the asset, The grant had been scheduled to drop to $10,000 from July 2017, however, in an effort to boost jobs in the construction industry, the Tasmanian government extended the grant for an additional 12 months.
With relatively low house prices, first home buyers aiming to obtain the government incentive, have a wide variety of choice. However, while the overall median house price of Hobart is low, inner city medians are relatively expensive (when disposable household income for this demographic is factored in), ranging from $580,000 to $645,000. Therefore, affordable suburbs are located over 5km away. Suburbs include Moonah, Mornington, and Austin’s Ferry, which have a median house price of $330,000,
$305,000, and $334,000, respectively
Each state governments FHOG coincides their current economic condition. As outlined above, the affordability issues in Sydney and Melbourne have forced first home buyers to buy over 40km away from major CBD’s. Therefore, it is no surprise more and more home owners are moving interstate.
As for the rest of the country, first home buyers can comfortably receive the entire government grant and purchase within close proximity of the CBD.