These days, most first home buyers (and their concerned families) are aware of the big cost of buying, which is saving the deposit. With average house prices in the greater Melbourne area now sitting at $770,000 for a house and $563,500 for a unit, according to the REIV[i].There’s one thing that plenty of people underestimate though: the stamp duty. Stamp duty in Victoria, for example, is over $40,000 on an average priced house, for a first home buyer. Rates start at 1.4% and go to 5.5%[ii].
At least, they did until this weekend.
On Sunday, the Andrews Labor government announced plans to scrap stamp duty for first home buyers on properties worth up to $600,000. For properties worth $600,000 to $750,000, first home buyers will get a sliding discount on the stamp duty[iii].
That’s not the only thing that’ll change for those currently in the market for their first home. Starting in January next year, the government will launch a $50 million pilot program (‘HomesVic’) that’ll give up to 400 first home buyers on low to median incomes a helping hand. For eligible applicants, the government will offer to take an equity share of up to 25% of the property. This will reduce the deposit that the first home buyer has to pay. The government gets their equity back when the property is sold. The first home buyer would only have to have a 5% deposit.
It’s similar to what’s going on in Western Australia at the moment. WA has ‘shared home loans’ as a subsidiary of their ‘KeyStart’ home loan programs[iv]. Those with a certain capped income can get the government to chip in, in return for equity. With ‘SharedStart’, ‘Aboriginal Home Loan’, ‘Disability Home Loan’, ‘Sole Parent Home Loan’ and ‘GoodStart Home Loan’, the government takes up to 40% equity in a home. Unlike the proposed Victorian program, though, KeyStart isn’t just restricted to those who haven’t owned a home before.
Both schemes seem to be evidence of a need for outside intervention to help people break the rent cycle and enjoy the economic security of home ownership. And in WA, it seems to be working pretty well – it’s been going since the ‘80s, with relatively little criticism.
Time will tell if government intervention really helps those who are struggling to save deposits while renting, as well as those on low but stable incomes. In the meantime, if you’re keen to help take some of the stress out of the situation for potential first home buyers in your organisation, check out our units ‘Buying your first home’ (for millennials) and ‘Financing your home’ (for a wider audience).