Out with the OLD and in with the NEW

Key changes to first home owner grants and handouts from the NSW government recently means Treasurer Mike Baird is squarely aiming his budget as a means to “kick-start” the state’s lacklustre home building industry, but will it achieve it’s purpose?

From October 1 2012, a first-home buyer (FHB) who purchases a $550,000 new home will get $35,240 in assistance. But if it is not new, they will secure nothing. The longstanding $7,000 first-home owners’ grant, negotiated with the federal government back when the GST was introduced in 2000, will no longer be available to buyers of existing homes, replaced by a scheme that gives $5000 for only new homes instead. FHBs of existing properties, a number that makes up over 85% of the market segment, will receive no financial assistance, a situation that hasn’t been experienced for just over 12 years now.

This may well impact the market for existing homes in some areas, however at this stage, it is too early to tell what ramifications there will be.  After all, the majority of FHBs in the Sydney market still won’t be able to afford to buy new, despite the government urging them to do so.  New houses in most suburbs of Sydney are well over the $650K cap and lenders have stringent requirements when it comes to settlement periods for loans of Off the Plan properties.

The underlying problem certainly appears to increasingly high costs for developers, given the hefty council contribution fees and other infrastructure and services that need to be paid for- making building new homes in NSW the priciest of all the Australian states. Perhaps the state government should have considered a review of development costs instead, as a reduction here would ultimately benefit all rather than the impending reality of  the grants for new building getting absorbed elsewhere.  In the end, the advantages of the concession will go to either the landowner or the developer, not the first home buyers.

For further information on all the grants and changes available please visit the OSR site here.