First home buyer demand will increase over the year

First home buyer demand will increase over the year

According to the latest announcement by the New South Wales government, eligible first home buyers could access stamp duty exemptions on new home purchases worth up to $800,000.  

New home builds will also see stamp duty discounts available for purchases between $800,000 and $1 million, where the discount reduces with a higher purchasing price.

The policy is a temporary, 12-month extension of existing stamp duty concessions from the 1st of August 2020.

CoreLogic states that previous research suggests that first home buyer grants and incentives have had a ‘vacuum’ effect, where first home buyer incentives are followed by large, but temporary, spikes in first home buyer activity. The fact that the new stamp duty discounts on offer will only be available for 12 months is likely to exacerbate this effect. The increase in first home buyer participation over a limited time window may actually lead to an increase in values up to the cut off values for stamp duty concessions.

Price clustering could move up to the $800,000 mark

Research of sales volumes by price suggests that sales volumes tend to ‘cluster’ just under the cut-off point for complete stamp duty exemptions, so that first home buyer can avoid paying the tax. $650,000 was the cut-off point for stamp duty exemption for first home buyers in this period. This price inflation would be skewed toward new home builds where the discounts apply.

What’s the impact?

  • First home buyer demand will increase over the year
  • The increase in first home buyer participation over a limited time window may actually lead to an increase in values up to the cut-off values for stamp duty concessions.
  • Furthermore, the reduced transaction costs associated with stamp duty exemptions mean borrowers have higher purchasing capacity, which may just be added onto the purchase price while first home buyer demand is elevated.
  • We are likely to increased activities on our developers to offload their stocks of properties on the market.
  • And this will increase the appetite of investors during this 12 months segment.

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