First Home Owner Grant discriminates against buyers of established properties

At a time when the WA property market is beginning to show signs of recovery, the State Government should be supporting all first home buyers. Find out how the FHOG is discriminating against buyers of established properties.

REIWA Councillor Hayden Groves
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At a time when the Western Australian property market is beginning to show signs of recovery, the WA State Government should be supporting all first home buyers, who play an important role in encouraging trade-up activity in the established market.

Since October 2015 when the $3,000 First Home Owner Grant (FHOG) for established homes was officially abolished, first home buyers of established properties have been discriminated against.

The way the grant currently stands is unfair. It deliberately skews first home buyer activity to the new build sector only, disadvantaging those first time buyers who would prefer to purchase an established property.

Activity should be encouraged in all sectors of the market

With lower levels of transactions in the market and housing affordability issues remaining pertinent across the state, the Government should be making it easier for all first home buyers to purchase a property, not just those who choose to build their first home.

A continued focus on encouraging newly built homes only in the first home buyer market contradicts the Government’s existing infill targets and contributes to urban sprawl. It also has the added impact of reducing sales activity in the established residential market as a whole. Reduced activity in the established residential market has negative impacts on state transfer duty revenue.

REIWA’s 2017-18 State Budget submission

As part of its 2017-18 State Budget submission, REIWA is proposing the State Government reintroduce a $3,000 FHOG to eligible buyers who purchase an established residential dwelling by reducing the current grant for new-builds to $7,000.

Making the grant fairer would lead to increased activity levels across the entire WA property market, particularly in the trade-up sector. This in turn would result in more transfer duty revenue for the State Government.

REIWA analysis shows if first home buyer activity in the established residential market lifted by 1,200 transactions a year as a result of reintroducing the $3,000 grant, it would cost the government approximately $3.6 million.

Naturally, this increase in first home buyer transactions means there would also be an equivalent number of trade-up buyers needing to purchase a new home. REIWA analysis reveals the cost of issuing the $3,000 grants would be offset by the projected $21.9 million dollars (based on a median house price of $510,000) in transfer duty generated from trade-up activity - a net increase in revenue of approximately $19.5 million over one year.

At a time when state finances are declining, any policy which leads to revenue generation should be properly considered by the WA Government.