First-home buyer activity in NSW to surge on July 1: CoreLogic

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Sydney Homes
Workers renovate a house in the Sydney suburb of Cammeray, Australia, August 3, 2015. Reuters/David Gray

The NSW government is set to roll out its first-home buyer amendments, which were announced by Premier Gladys Berejiklian and Treasurer Dominic Perrottet last week. CoreLogic head of research Tim Lawless said the new measures will likely boost up demand for the segment.

The changes will provide first-home buyers with a stamp duty exemption for properties below $650,000. The measure was slated to take effect starting July 1.

According to Lawless, first-home buyer activity is expected to stall before surging higher on July 1. But the long-term outcome, he said, may be self-defeating because of higher demand that pushes prices up. He added that eliminating stamp duty for first-home buyers will likely create issues for qualified buyers who have just entered into contracts. There is a possibility that a surge in first-home buyer demand could fill the “hole” left by fewer investors in the market.

Per the Australian Bureau of Statistics (ABS), first-home buyers compromised only 8 percent of owner-occupier mortgage commitments in March 2017. That was slightly higher than the record low of 7.5 percent in September 2016 and below the long-term average of 17 percent.

Lawless said the new measure is substantially broader in scope because it provides exemption for both new and established housing with a price tag under $650,000. “The proportion of properties that meet the exemption criteria falls away sharply if the analysis is confined only to the Sydney metropolitan area where 25.8% of dwelling sales over the past twelve months were at a price of $650,000 or less,” he said in a press release published at corelogic.com.au.

CoreLogic emphasised that first-home barriers must assert with the challenge of raising a deposit, which was dubbed as a key barrier to market entry. Lawless said buyers who could not stamp up a 20 percent deposit have been given another chance. Furthermore, since stamp duty on lenders’ mortgage insurance (LMI) is charged at 9 percent of the premium, a first-home buyer with a 5 percent deposit on a $650,000 property can look forward to saving at least $2,250.

He went on to explain that removal or reduction of the transactional costs for first-home buyers will likely have both positive and negative results across the NSW housing market. Policies intended for the improvement of housing accessibility for first time home buyers are likely to be positively received but measures for pushing demand tend to result to higher property prices.

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