First home buyers urged to stay on sidelines

Posted: 19 February 2018 2:51 pm
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A CoreLogic analyst has warned first home buyers against being enticed by government incentives.

CoreLogic research analyst Cameron Kusher has warned that first home buyers should avoid being "lured into buying at the peak of the market because of attractive incentives".

"In New South Wales, from 1 July 2017 first home buyers don’t have to pay stamp duty for both new and existing homes for properties up to $650,000. Stamp duty payable is reduced for buyers paying between $650,000 and $800,000. In Victoria, if you buy a new or established home from July 1 2017 no stamp duty is payable on homes worth less than $600,000 and stamp duty is reduced for properties worth between $600,000 and $750,000," Kusher said.

A complete guide to stamp duty

Kusher said the removal of stamp duty has led to a surge in first home buyer housing commitments. And while average loan sizes haven't increased markedly in New South Wales, Kusher said average first home buyer loan sizes had increased by 7.0% over the past six months.

"This would suggest in Victoria, the stamp duty concessions are leading to mortgagees borrowing more," he said.

But Kusher warned that first home buyers were entering a declining market.

"For first home buyers there may be a sense that the removal of stamp duty along with the falling share of investors in the market creates the opportunity for entry; however, ideally you do not want to be buying into a market which has only recently entered a downturn," Kusher said.

Kusher said first home buyers could be better served waiting for prices to bottom out.

"By doing this you potentially avoid going into negative equity immediately, you potentially buy at a lower price and you have time to save an even larger deposit for your mortgage. Furthermore, for well qualified borrowers with substantial deposits banks are competing heavily and offering substantial discounts for owner occupiers taking out principal and interest mortgages so if you take time and shop around you may be able to get a really good mortgage rate."

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