State and federal government programs currently offer stamp duty relief and deposit guarantees for first-time home buyers based on the buyer’s income bracket, location and price of the property he wishes to purchase. But according to PropTrack economist Angus Moore, these policies can help some first time buyers buy earlybut there is a more systemic issue at play that should be addressed.

“Even with concessions in place, for first-time home buyers targeting entry-level homes, stamp duty significantly slows the path to purchase,” Moore said.

“For many first-time home buyers, it’s saving the 20% deposit – rather than paying off the mortgage once they get one – that’s the hardship on homeownership,” he noted.

In Sydney, the purchase price of a typical entry-level home for a first-time buyer sits at $750,000; in Melbourne it’s $610,000. As housing prices have increased, so has the time it takes to save a down payment.

PropTrack data shows that 10 years ago a typical Sydney shopper spent 4.4 years saving for a home deposit. Now it takes 7.1 years. In Melbourne, this duration increased from 4.5 years to 6.1 years. Meanwhile, in smaller markets across the country, that figure has remained largely constant at around four years for Brisbane and Adelaide.

But stamp duty still accounts for a big chunk of time spent saving in all those places, Moore said.

“The stamp duty for an entry-level home adds about an extra year of savings in most cities. For more expensive and mid-priced homes, the stamp duty adds an additional two years of savings in Sydney and Melbourne and between an additional one and 1.5 years in other cities,” he said.

Mr Moore acknowledged that stamp duty concessions for first-time home buyers in Canberra, NSW, Victoria, Queensland, Western Australia and Tasmania are helpful. But all of these programs, except ACT, cap the maximum price of a home a first-time buyer can buy.

In Sydney, the first home buying concession cuts deposit savings time by about six months for a relatively affordable home for some buyers. In Melbourne, the concession reduces time savings by up to a year and a half.

But Moore noted the caps restrict savings to a certain demographic of first-time homebuyers with a narrow set of needs.

“While a more affordable entry-level home may qualify for stamp duty concessions, even mid-priced homes will not in nearly every state,” Moore noted.

“In particular, the caps mean that few detached houses are eligible. Instead, first-time home buyers are mostly limited to apartments. This is not the case in Canberra, as the concession has no price cap and therefore all accommodation is eligible”.

About the Author

Juliet Helmke

Based in Sydney, Juliet Helmke has extensive reporting and writing experience in business, technology, entertainment and the arts. She was previously an editor at the New York… Read More

Stamp duty adds 2 years savings for some FHBs

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Last update: May 06, 2022

Posted: May 07, 2022