A heated first home buyers market
Since the NSW state govt announced in September this year that the current stamp duty exemption for first home buyers (of existing properties) was being axed at the end of 2011, we’ve noticed a more active market in the sub $500K price bracket. Though the exemption still applies to newly built and off the plan purchases, there aren’t many suburbs left in Sydney for those who prefer a house and land purchase for this money. As the year draws to a close, there are still first home buyers out there anxious to locate a property and save themselves up to $18,000- not a small sum!
The trouble with such govt intervention in the housing market, however, is that it can create an artificial short-term stimulus, causing prices to rise for a brief period, and then deflate again when 25% of the buyers have disappeared. The proof is yet to be seen, and we won’t really know the outcome until the quarterly growth figures have been published in Jan 2012. However, anecdotally, we have experienced increased competition from first home buyers in the last 10 weeks and have found ourselves competing with more than the usual number of purchasers, sometimes as much as 3-4 FHB’s on the one property.
There are always going to be some properties that are less “attractive” to first home buyers, however, and these can include “renovator delight” properties, those with development potential or land value sites only, as well as those over the mid $500K’s value. As the stamp duty exemptions apply to those properties up to $500,000 and then a sliding scale applies until full stamp duty is payable at $600,000 there is less competition at the pointy end of the $500K budget.
Investors appear to be hanging back for 2012, particularly those who are buying “bread and butter” properties in those suburbs that contain median prices around the $400-500K price bracket. We believe that, as a result, though there may be fewer FHB’s about in early 2012, investors may turn out in larger numbers and subsequently re-balance the market demand. Should interest rates continue to fall (with the major lenders passing on these cuts) there may be just as much competition as we’re currently experiencing. Interesting times ahead for 2012, we’re sure. Now who has that crystal ball?!