First Home Buyers Grants and Concessions
Friday 31 May 19
As you prepare to purchase your first home, the goal can seem a bit daunting. My Dad paid $10,000 as a house and land package for the home I grew up in. My wife and I paid just over $30,000 for our first home. OK, I’m giving away my age, but that was roughly five times the price of a nice, new family car.
Today you might get the car for $30,000 but it’s unlikely that you are going to get the home for $150,000! It’s a much larger leap. You need a boost.
That boost can come from multiple sources, and we are going to look at two of them in this article: First Home Owners Grants and Stamp Duty Concessions.
First Home Owners Grants
That’s plural, because there is a different one in each State. And each State likes to give it their own name, so there will be a bit of variation there. However, there tends to be a lot of similarity between them, partly because of competition between the States, but largely due to being a federally based scheme.
On a regular basis these schemes are changing, so you need to search the web for your own State’s First Home Owner’s Grant, and see the latest details. And a caution goes along with the constant change. Governments being what they are often fail to get rid of outdated information on the internet. You may find a link to old information, so make sure you look around carefully on the State or Territory’s own web page, and look at the dates given as to what applies and when.
Where the First Home Owner’s Grants apply, they are generally for an individual or couple buying their first home, and it might have to be new home – one in which no-one has ever lived, or one which has been substantially renovated to where it’s like a different home to what it was. Again, check the State’s website for details.
For a couple, if either of them has ever owned a property in Australia, then it’s likely that both would be excluded from receiving the grant.
You will also be required to live in the property after you purchase it for a period of time, typically 6 months during the first year of ownership.
Stamp Duty Concessions
While the purchased property needs to be new to get the First Home Owner’s Grant, a first home buyer can often get a concession on Stamp Duty even if the property is an existing one. The Stamp Duty can be much greater in value when purchasing an existing property than what the Grant plus the Stamp Duty Concession is for the new one. This would be true in situations where Stamp Duty would be payable on the land value for the new home, with the land being settled prior to construction commencing.
In some States the Stamp Duty concession is limited by the amount of the purchase price, in others it may be limited by the incomes and family situation of the first home buyers.
First Home Loan Deposit Scheme (FHLDS)
The First Home Loan Deposit Scheme is a Australian Government initiative to support eligible first home buyers purchase a home sooner.
It does this by providing a guarantee that will allow eligible first home buyers on low and middle incomes to purchase a home with a deposit of as little as 5 per cent (lender's criteria apply). See Beth's article regarding the eligibility criteria for these loans here https://www.graceloans.com.au/loan-advice/first-home-loan-deposit-scheme
Which is Best, a New or Existing Home?
In NSW, where we are based, there is a First Home Owner Grant (New Homes) that provides $10,000 for a first home buyer of a new home. For both new and existing homes there is a concession on Stamp Duty for purchasing a first home. In both cases there are limits on the property value.
Factors to consider
The new home is generally going to cost more than an entry level existing home of the same size. That means you are going to have to borrow more money to get it.
One day it’s also going to be an old, existing home with the lustre worn off, and the existing home may actually be in a better location, closer to a growth area. That naturally will depend somewhat on how “entry level” it is. Low cost homes generally point to areas which haven’t seen a lot of growth in the past, and unless something changes, that may continue into the future.
In NSW with a land and construction package, you generally settle the land first, and only pay stamp duty on it. With the existing home you are paying stamp duty on the entire purchase price. That’s a huge difference. This tends to bring the new property down closer to the existing property for normal purchasers, but the first home buyer is going to get that big discount off of the existing one, bringing it even lower.
Having said all of that, sometimes when the purchaser doesn’t have much for a deposit, that $10,000 towards the purchase can make the difference of being able to do it.
So, as we have been telling you all along, these things are complex, but we are familiar with them, so have a chat with us, and we can quickly sort out your options. And that’s true in other States as well. You don’t have to be in NSW.