Good-bye First Home Owners Grant (Vic)

by Chris Lang on May 17, 2013

Taking money away

Have you heard? There will be no more First Home Owners Grant in Victoria for established houses. When the new legislation passes, from the 1st of July 2013 people purchasing their first (established) home won’t be receiving $7000 any more. For new houses and apartments’ buyers there is some good news though – they will be receiving a $10,000 grant.

Clearly, the government is looking to boost the construction industry which has been doing worse and worse for quite a few years by now. This, however, is no consolation to people missing out on the first home owners grant – and they make up the majority of first home buyers, according to Robert Larocca from REIV. His explanation sounds quite logical – young professional couples prefer to buy closer to where they work, which means Melbourne’s inner suburbs, and you won’t find many new houses there. So effectively the majority of first home buyers are worse off, because they have lost their entitlement to $7000 and only gained 10 extra percent of stamp duty cut, also subject to new legislation from 1 July 2013.

The way of the mainstream media to presents this, “First home buyers lose the grant but gain 40% reduction in stamp duty, so one offsets the other” is not entirely correct. The SRO website says that even before 1st July 2013 first home buyers were already entitled to 30% reduction, and the new legislation only pushes forward an additional 10% reduction in stamp duty. Yes, the total reduction is 40%, but most of it was already promised and given, before dealing the blow of scrapped FHOG.

As a real life example, anyone buying their first, established home after 1 July 2013 for say $300,000 will not get $7000 but save $1137 on stamp duty. If they were to buy before 1 July, they would have gotten the $7000 and paid $1137 extra in stamp duty. Any way you look at this, that’s a loss of almost $6000.

And now a question for all first home buyers – how does this change affect your plans?

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