THIS WEEK MARKED THE INTRODUCTION ON NEW STAMP DUTY EXEMPTION THRESHOLDS FOR FIRST HOME BUYERS. FROM THE 1ST JULY ONLY PROPERTIES PRICED UNDER $430,000 WILL RECEIVE THE FULL STAMP DUTY EXEMPTION, WITH CONCESSIONS PHASING OUT AT $530,000. NO CHANGES WERE MADE FOR FIRST HOME BUYERS OF NEW HOUSE AND LAND PACKAGES, WITH EXEMPTIONS FOR LAND VALUED AT UNDER $300,000 BEING EXEMPT AND CONCESSIONS AVAILABLE FOR PURCHASES UP TO $400,000.
Applications for First Home Owner Grants lifted 33 per cent in May according to figures just released by Treasury and it is anticipated that the uplift will be carried over into June.
To consider whether this uplift was directly attributable to the changes to Stamp Duty thresholds, the first step is to consider what happened in April/May in previous years. In that period in 2013 applications lifted 22 per cent and in 2012 they lifted 30 per cent. This pattern was repeated every year with the exception of 2011 and 2008 (although new dwelling applications rose 4 per cent that year).
When you unpack the data further you begin to question whether the uplift this year was solely fuelled by the Stamp Duty changes as the increase was mainly due to applications for new housing (56 per cent increase) rather than existing housing (15 per cent increase). Existing housing applications are normally significantly higher than new housing so percentages can be misleading but in this case the number of applications increased by 378 for new construction and 153 for existing.
Logically, if the Stamp Duty changes were the major factor this year, there should have been a surge in existing housing however applications for the First Home Owner Grant for new dwellings reached 49 per cent of the total number of applications in May, the second highest ratio on record. The previous record, of 50 per cent share of the total applications, was in October 2009. Historically FHOG applications for new homes have averaged 26 per cent of total applications.
Treasury does not release “seasonally adjusted figures” so we looked at the new versus existing for April/May in previous years and the same pattern was evident in most years ie, in 2013 applications lifted 35 per cent (new) and 16 per cent (existing), in 2011 the uplift was 56 per cent (new) and 12 per cent (existing). That pattern was repeated in most years.
The market responds to arrange of stimulus from interest rates to product availability and it is important to understand what the drivers are that push sales up, or down.