First Home Buyer Choice ends this week

The option came into effect on 16 January under the former NSW administration (under former NSW premier Dominic Perrottet) in a bid to lower the upfront costs of a first home buyer’s purchase and reduce the time needed to save for a deposit.

However, after Chris Minns took power earlier this year, it was announced that the (FHBC) would be repealed in favour of an increased stamp duty exemption threshold.

As such, only first home buyers who exchange contracts on or before this Friday (30 June 2023) will be able to utilise the FHBC and will have until settlement to opt into the scheme.

Retrospective refund applications are also open until 30 June 2023. Those who have already opted into FHBC won’t be affected.

While brokers have been busy preparing first home buyers for the end of the FHBC for the past few months, there has been a surge in activity in the NSW property market in recent weeks as the deadline loomed.

Indeed, CoreLogic figures show that Sydney had the busiest auction market of the capital cities last week, with 733 homes auctioned across the city (with a 78.7 per cent preliminary clearance rate), while the week before saw 772 homes auctioned across the city this week, the highest number in 11 weeks.

New stamp duty thresholds

While the FHBC scheme is being repealed, from Saturday (1 July), the transfer duty exemption threshold will increase from $650,000 to $800,000 and the concessional rate will increase from $800,000 to $1 million for new and existing home purchases by eligible first home buyers.

The changes, part of the Minns government’s First Home Buyer Assistance Scheme (FHBAS), will reportedly mean that 84 per cent of FHBs will either pay no stamp duty or pay a reduced rate.

Speaking of the changes, Anthony Landahl, managing director of NSW-based brokerage Equilibria Finance, said he had seen some increased inquiry from first home buyers looking to understand the benefits of the FHBC in the past few weeks.

He told The Adviser: “I think there was certainly merit in the scheme of amortising stamp duty over time. One of the biggest challenges for first home buyers is building a deposit so that was definitely a solution for that, but I think there has been a little bit of uncertainty around whether the [tax rate] would increase over time and whether it is actually of benefit, as it depends on the time frame of how long people hold the property.

“But I certainly believe that for those facing challenges of building a deposit, there was certainly some merit in having an amortising tax over time.”

Mr Landahl said that the scheme may have helped more borrowers into market but noted that as it was only in place for six months, it may be hard to determine any longer-term benefits.

However, he added that he believed the new FHBAS scheme could benefit many first home buyers, noting: “If I think about first time buyers we’ve had over the last 12-month period, a big portion of them would have probably been sitting in that $800,000 to $1 million mark, which is where the concessions are going to sit.

“So, by increasing some of those stamp duty concessions — even if it’s replacing the old program — that can only be a good thing. The good thing is they’re trying to assist and focus on first home buyers getting into the market, as it has been hard for first home buyers to do so recently.”

However, Eva Loisance, manager of the broker division at Finni, said that there could be a negative impact on prices.

She explained: “While the reform intends to make housing more affordable and accessible for first home buyers by offering a full concession up to $800,000 or reduced stamp duty up to 1 million, the effect of the reform on house prices is not so clear.

”The change has been welcomed by first home buyers looking to get into the market in areas where the previous schemes didn’t help. However stimulating demand in the eligible price range will probably result in higher property price as demand will exceed supply. This could undermine the reform’s purpose with a “seller’s market” potentially returning sooner than expected.“

[Related: NSW government to raise stamp duty threshold]