Young buyers looking for their first home in Sydney and Melbourne haven’t had it this good in years. 

Interest rates remain at near record lows, with plenty of lenders (especially smaller ones) offering loan in the mid to late 3% range. That’s half the long term average of 7-7.5%. 

Stamp duty concessions are making first purchases cheaper in our most expensive markets. 

There are fewer investors to compete with due to tighter lending restrictions and there’s also fewer Chinese investors, who have been dissuaded by arbitrary fees in both states. 

Many first home buyers have the Bank of Mum and Dad to help them, so getting a loan approved is easier. Meantime, the rest of the market is struggling to get finance under tougher lending policies. 

On top of all this, prices are cooling in Sydney and Melbourne and a pipeline of new apartments (the typical product for first home buyers) is still working its way through.

This means more choice for young people and potentially a further softening in apartment prices as supply increases temporarily with every new build completed. 

Let’s go over the government help currently available to first home buyers in NSW and Victoria. 

1. Stamp duty concessions 

In Victoria, there is no stamp duty on new or existing properties worth $600,000 or less, with a sliding scale of concessions up to $750,000. 

In NSW, there is no stamp duty on new or existing properties worth up to $650,000, with a sliding scale of concessions up to $800,000. 

2. First homeowner grants

In Victoria, a $10,000 grant is available to all metro area buyers, either building or buying a new home valued up to $750,000. If you live in regional Victoria, the grant is $20,000. 

In NSW, buyers building their first home get $10,000 for properties worth up to $750,000. Buyers purchasing a new build or off-the-plan also get $10,000 for properties worth up to $600,000. 

3. Savings assistance 

The Federal Government’s First Home Super Saver Scheme allows young people to make voluntary contributions of up to $15,000 per year into their super ($30,000 total) to save for their first property. 

These contributions are taxed at the usual super rate of just 15%. That’s less than half the typical tax rate (32.5%) that someone earning $37,001 – $90,000 has to pay. 

These funds, along with earnings achieved while they’re in super (the best of the basic low cost industry funds typically return around 8% per year), can later be withdrawn for a first home purchase (minus a small withdrawal tax calculated by taking the buyer’s marginal rate of income tax less a 30% offset).

In Sydney and Melbourne, it won’t make the difference between being able to buy and not but it will help with your deposit, which is often the biggest hurdle young buyers face. This is a no-brainer – fill in a form and you’re likely to have several thousand in extra savings by the time you’re ready to buy.  

4. HomesVic co-ownership scheme

In Victoria, eligible first homebuyers can co-purchase a new or existing property with the Victorian Government in a pilot scheme called HomesVic. The Government has committed to purchasing up to 400 homes with an equity share of up to 25% in each. Buyers need a deposit of just 5%. 

Down the track when the property is sold, HomesVic receive its equity share back. 

The scheme commenced in February and already, 250 people have been given provisional approval to buy and 50 of those have exchanged contracts.

Surge in first homebuyers

The latest Housing Finance figures from the Australian Bureau of Statistics show a surge in first homebuyers over the past year. In the second half of 2017, following the introduction of stamp duty concessions in both states on July 1, first home buying soared. In 2018, the cooling market is clearly propelling the trend and keeping first home buyer activity at the same consistently high level.  

Month-to-month, the figures show a peak in first home purchases in November 2017 and May 2018 in both states. We haven’t seen this level of activity since 2011 in NSW and 2009 in Victoria.

Most people will tell you their first home became a cornerstone asset that allowed them to build equity, invest and grow their wealth later. With it comes peace of mind that you don’t have with rentals and the satisfaction of paying off your own loan, not someone else’s via your rent. 

So, take advantage of what’s in your corner this Spring…your first home maybe waiting for you, just make sure you don’t overleverage yourself and I always encourage you to buy for the medium term