A Bigger & Better Role for FHB Grants?
Assistance for first time homebuyers is not a new concept, the Federal Government’s first scheme dates back to 1964.
Having past into history the Federal Government today offers no direct assistance to the FHB. There was a short-lived savings assistance package. It was a fairly miserable scheme offering a 17% ‘bonus’ for savings to $6,000 and a concessional 15% tax on interest earned. By any measure stingy amounts when you consider median house prices.
Still, the Federal Government is aware of the sensitivity that surrounds housing affordability and that includes FHB assistance. Out of the forty recommendations made in The Senate’s report Out of Reach? The Australian housing affordability challenge: 4 recommendations directly addressed varied options of government assistance. These included: direct means tested FHB grants, ways to assist saving for a home deposit, shared equity and while not necessarily a direct help to the FHB, ways to reduce the cost of downsizing by retirees.
States in The Drivers Seat
These days it’s the State Governments’ who offer a range of grants and stamp duty concessions to the FHB, and while helpful they also look out of touch with today’s market conditions.
A very brief look at what’s on offer in several states shows that the assistance offered generally sits around $10,000, although QLD is much more generous at $15,000 to $20,000. There are also varied stamp duty concessions available in some cases.
In NSW the recently reduced FHB grant is currently $10,000 for new homes valued to $750,000, stamp duty is not payable for the FHB to a value cap of $550,000 (houses and apartments) and for land valued to $350,000. There are also concessional stamp duty savings for homes valued between $550,000 and $650,000 and land valued between $350,000 and $450,000. All these amounts only apply to new homes, long seen as a flaw because established homes are not included and many first time buyers will purchase established.
Like it is in other states jurisdictions these grants are also aimed at boosting construction activity, and it might be an option if the grants were just based upon helping the FBH.
In Queensland the grant can be as high as $20,000 because there’s a bonus on offer until June 2017, again the grant is linked to a price point of $750,000. There’s also a temporary boost of $5,000 in WA until December 2017, both states are looking to fuel new home construction.
Victoria has a much wider mix of assistance, some of which does extend to established homes valued under $600,000, and there are stamp duty savings for off-the-plan buyers and concessions aimed at young farmers. It’s interesting to see that Victoria has also had the biggest lift in supply over recent years, with benefits flowing to the wider economy, as they also have in NSW.
Assistance: For or Against?
The mix of FHB assistance and concessions always attracts a lot of varied opinions, however, even if seen as an imperfect area of housing policy such grants are popular but could they be improved?
In NSW the answer looks like yes! Here stamp duty revenue is huge ($9 billion in the current financial year) and yet stamp duty rates have not changed in 30 years and the average duty paid, mind you the average is over $31,000.
A recent flurry of letters to the editor published in The Australian, did however, highlight the wide divergence of opinions when it comes to FHB grants and assistance in its various forms.
Some comments included the view that only more supply would help the FHB, there was also a yearning for the quarter acre block, almost as a right of birth. The mix of capital gains tax and of course stamp duty was criticised.
Young buyers were labeled as overly fussy and not being prepared to make sacrifices (unlike earlier generations) to get into a home. But still there were suggestions that direct assistance is still a good idea, either to help boost savings but also by offering tax concessions and grants.
Given the great social and economic importance given to housing affordability, perhaps more targeted grants are a good idea, and perhaps more directly tied to boosting ownership and not so much as an policy obsession to boost building activity. After all a house in any form old, or new is still a home.