WA buyer’s grant ‘flawed’

Pilbara News - - Property - Hay­den Groves Hay­den Groves is the pres­i­dent of the Real Es­tate In­sti­tute of WA.

When the global fi­nan­cial cri­sis hit in 2007, the then Rudd Gov­ern­ment raised the First Home Owner Grant to $14,000 for es­tab­lished homes and a whop­ping $21,000 for new builds.

This stim­u­lus helped lift WA’s prop­erty trans­ac­tions to near 70,000 by 2009.

To­day, trans­ac­tional ac­tiv­ity is less than half that, with just over 30,000 to­tal trans­ac­tions recorded for the year so far.

The FHOG has un­der­gone many it­er­a­tions since its in­tro­duc­tion and now sits at $10,000 for first-time buy­ers keen on buy­ing a new dwelling that has never been lived in or who want to buy land to build on. Those who pur­chase an es­tab­lished home get noth­ing other than a trans­fer duty ex­emp­tion for prop­er­ties pur­chased at a value un­der $430,000. In Tas­ma­nia and the North­ern Ter­ri­tory, the FHOG for both es­tab­lished and new builds re­mains at $20,000.

WA’s cur­rent sys­tem is flawed for a num­ber of rea­sons.

Firstly, the $10,000 grant is of­ten sim­ply passed onto builders, who I’ve seen raise the cost of their en­try level houses by the pre­cise amount of the FHOG when­ever it is raised.

Se­condly, first-homebuyers choos­ing a newly built apart­ment only get zero trans­fer duty re­lief up to a pur­chase price of $430,000, whereas those that buy land and build from scratch don’t pay duty un­til the land value ex­ceeds $300,000.

WA’s FHOG pol­icy en­cour­ages first-homebuyers to buy cheaper land on the city out­skirts, con­tribut­ing to ur­ban sprawl.

This is con­trary to the State Gov­ern­ment’s de­sire to im­prove in­fill op­por­tu­ni­ties across Perth.

Thirdly, land de­vel­op­ers will of­ten in­cen­tivise build­ing com­pany rep­re­sen­ta­tives with com­mis­sion pay­ments for them to push home builders into buy­ing land in cer­tain lo­ca­tions. These com­mis­sions are clawed back by in­creas­ing the con­struc­tion cost, which is al­ready in­flated by the avail­abil­ity of the FHOG.

Fi­nally, the FHOG un­der­mines the val­ues of es­tab­lished prop­er­ties in emerg­ing ar­eas by re­mov­ing de­mand for homes in af­ford­able ar­eas such as Bal­divis, Alki­mos and Ar­madale.

While there’s a need to sup­port the build­ing in­dus­try and those who work in it by in­cen­tivis­ing first-homebuyers, split­ting the FHOG to $7000 for new and $3000 for es­tab­lished would help re­cal­i­brate buyer be­hav­iours and en­cour­age growth in the es­tab­lished mar­ket.

Over­all, the FHOG has been around for too long and should be re­moved. Trans­fer duty and other taxes that act as bar­ri­ers to eco­nomic growth (pay­roll tax the clas­sic ex­am­ple) should also go.

It is one of REIWA’s key pol­icy po­si­tions that these bar­ri­ers be re­placed with a broad-based land tax regime that loosens the shack­les on the prop­erty mar­ket, en­cour­ages trade-up ac­tiv­ity and re­leases more af­ford­able en­try level es­tab­lished hous­ing.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.