First-home buyer policies failing in NSW and Queensland

While it’s still early days, the latest housing finance figures published by both the ABS and mortgage broker AFG suggest NSW and Queensland are discouraging many first-home buyers after doubling state handouts last year, but only if they buy or build a new home, while offering nothing for those that buy an existing property.

The most up-to-date mortgage figures are provided by aggregator AFG, which claims to write one in every 10 home loans in Australia through its network of affiliated mortgage brokers.

AFG reports a healthy 15% rise in the volume of mortgages arranged by brokers over 2012 from $28 billion to $32 billion, but says the average long term share of home loans arranged for first-home buyers, usually between 12% and 15%, collapsed to just 4.2% in NSW and 4.5% in Queensland during the last two months of 2012, after the $7,000 first-home buyers grants were withdrawn in both states in favour of the $15,000 boost for new homes only.

In comparison, investors dominated the mortgage market in these two states, comprising 46.3% and 35.9% of all home loans respectively.

Official ABS data is only up until November, so it is difficult to say a trend is emerging, but the figures certainly suggest first-home buyers have not been swayed to consider a new house or apartment over an existing property.

The ABS records that the number of first-home buyer loans arranged in NSW fell from 2,088 in October to 1,383 November, while in Queensland first-home buyer loan numbers fell from 2,116 in October to 1,417 in November - in both states a monthly drop of 33%.

Furthermore, just 793 first-home buyers took advantage of the revised NSW first-home owners' grant in December last year, the lowest take-up in 20 years with the NSW state opposition claiming that Barry O'Farrell's decision to dump first-home buyer grants and stamp duty exemptions have been "nothing short of devastating for young people trying to buy their first home".

Indeed, first-home buyer changes are particularly tough on those in NSW that wish to buy an existing property.

Since October 1, the NSW state grant has been lifted from $7,000 to $15,000 for new homes valued up to $650,000, while a maximum stamp duty exemption of $20,240 is also available for new homes worth up to $550,000.Apply

First-home buyers that purchase an existing home get nothing.

In Queensland, since September 11, a $15,000 first-home owner construction grant (FHOCG) has been available for new property bought or built at a value under $750,000, but all first-home buyers also pay no duty on purchases up to $500,000, with a phasing-out rebate applicable for values up to $600,000.

The doubling of the NSW first-home buyer grant was announced in mid-June, but only came into effect three-and-half months later, with Property Observer reporting on the conundrum it created for both first-home buyers and investors over this interim period.

Queensland government introduced its construction grant with immediate effect from September 11, but gave first-home buyers up until October 11 to finalise contracts.

Contrast this with Victoria, which still offers a $7,000 first-home buyer loan for both new and existing home purchases (and increased stamp duty concessions from 20% to 30% on January 1) and first-home buyer loan numbers were little changed over the month, falling marginally from 2,545 to 2,407.

Ray White chairman Brian White labelled the new first-home buyer polices as “no longer a first-home buyers but a builders incentive” and a "deceit", saying they distorted the market, but not in a healthy way.

The latest data suggests he could be right.