NSW, Victorian stamp duty exemptions are drawing first home buyers back to market

Mortgage approvals data shows that state government stamp duty discounts are luring first home buyers back to the market.

An auction in the Geelong suburb of Belmont. (Picture: Andrew Henshaw)

First home buyers have surged back into the housing market after state governments on the east coast started offering them stamp duty savings.

The proportion of loans to first home buyers reached its highest point in four years in July, at 16.6 per cent, according to the Bureau of Statistics.

From July 1, the Victorian government introduced stamp duty exemptions for first home buyers for properties worth up to $600,000, while in NSW the threshold was $650,000. Tiered concessions were available for homes worth up to an extra $150,000 in both states.

The affordability measures follow spiralling eastern seaboard price growth over the past five years that has made it harder for first home savers to accumulate a deposit, but some in the market have raised concerns that the grants could push up prices further.

HIA principal economist Tim Reardon said the government incentives had a “significant” impact on buyer behaviour.

“These policy interventions have driven a dramatic increase in the involvement of first home buyers in the market,” Mr Reardon said.

CommSec chief economist Craig James noted a rise in loans for newly built homes combined with the increase in first home buyers.

“Not only are plenty of homes being built, some Gen Ys and millennials are actually moving out of their parents’ homes and buying their own abode,” Mr James said.

“More homes are being built and demand remains firm. We expect the housing market to experience a soft landing.”

The number of Australian home-loan approvals rose by a seasonally adjusted 2.9 per cent in July from June, the Bureau of Statistics said.

Economists surveyed ahead of the announcement had expected a rise of 1.0 per cent for the month. The value of loans for investment housing fell by 3.9 per cent from June, the ABS said.

Finance approvals to build new houses rose by 3.1 per cent in July from June. Approvals to buy newly built dwellings rose by 1.9 per cent, while lending for the purchase of established homes rose by 2.9 per cent in the month.

The data comes amid increasing evidence that Australia’s housing market has cooled after mortgage lending rules were tightened in March to make riskier lending harder, especially to investors.

House prices were unchanged nationally in August, raising expectations that a boom in recent years may finally be fizzling out as well as cooling fears around one of the biggest risks to the economy, according to property research group Corelogic.

Housing’s rise to record levels has strained affordability and lifted household debt to among the highest globally.

While more time is needed, the curbs on mortgage lending appear to be taking hold, with only Melbourne showing some signs of resistance, posting a 0.5 per cent rise in house prices over August.

Australia’s central bank is increasingly convinced that the country’s home-price surge is levelling off.

While “rising briskly in some markets ... there are signs that conditions are easing, especially in Sydney,” noted Reserve Bank of Australia Governor Philip Lowe this week.

with Dow Jones