HIA hypocritically demands more first home buyer bribes

By Leith van Onselen

In last year’s NSW State Budget, the Berejiklian Government eliminated stamp duty for first home buyers (FHBs) purchasing a new or existing home valued up to $650,000, whereas discounts were offered to FHBs for purchases valued between $650,000 and $800,000.

The result has been to significantly increase FHB demand in NSW, with FHB finance commitments up by 63% relative to December 2016:

Today, NSW Premier, Gladys Berejiklian, has hailed the jump in FHBs as a ‘win’ for housing affordability. From The AFR:

On Sunday, Premier Gladys Berejiklian said there had been 5400 more first-home buyers in greater Sydney since her government introduced stamp duty concessions in July 2017…

“I made helping first-home buyers one of my first priorities as Premier, so I’m thrilled that our stamp duty reforms are driving real outcomes for people in NSW,” Ms Berejiklian said.

“While we know there is always more to do on tackling housing affordability, the results so far clearly show that we are turning the tide for first-home buyers.”

Curiously, the rent-seekers over at the Housing Industry Association (HIA) are still not happy, calling for the NSW Government to expand stamp duty concessions even further:

The HIA is advocating for an elimination of stamp duty across a larger bracket of house prices.

The current brackets of discounts for purchases up to $850,000 was not enough to help many buyers get on top of high median house prices even for western Sydney, HIA executive director David Bare said.

Despite a gentle fall in house prices in Sydney since October last year, median house prices for houses are still about $884,000.

“Having more first-home buyers in the market is a good sign because they have been out of the market for so long,” Mr Bare said.

“It shows that stamp duty is the reason why people don’t go into the market. A more structured application of the reduction in stamp duty will have a better effect [of increasing homebuyers]. They’ve struggled to keep up with prices.”

Has the HIA forgotten that in June last year it argued that cutting stamp duties for FHBs would merely raise house prices and undermine affordability:

Shane Garrett, senior economist for the Housing Industry Association, said… “Boosting subsidies for existing homes only gets first home buyers bidding against each other in that side of the market. It would have been better to stimulate the construction of new homes”…

Of course, the HIA was correct then when it warned that NSW’s FHB stamp duty changes would merely push-up prices. So why is it now arguing for the stamp duty concessions to be increased?

Logic and consistency in thought are clearly not the HIA’s strength.

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  1. Jumping jack flash

    Their definition of “affordability” is flawed.
    And necessarily so. Can you imagine if the government implemented policy to actually make houses fall in price, and therefore become affordable?

    No. There will be no policies that will make houses more affordable.
    Anything they do will therefore only help make them less affordable.

    There may be the briefest of brief “leg up” during the transition for those champing at the bit to plunge themselves into unfathomable quantities of debt, however.

  2. property prices are dropping we all know that. This is only being introduced to soften the blow for the 2018 1st quarter results.

    Once people notice that all this effort still created a negative figure for the 1st quarter, the 2nd and 3rd quarter results will be a significantly higher negative figure……***patience young Padawans…..patience ^_^ ***

  3. ErmingtonPlumbingMEMBER

    Maybe an agressive capital gains tax regime, combined with across the board award wage increases can create greater home affordability.
    Any per annum increase above the CPI for that year gets a 90% capital gains tax leveled on it, for all investment properties and Owner occupied dewlings sold in under 10 years.
    It’s speculation that has Fked our home ownership rates and agressive action is required to correct it.

    • Agreed. It’d never fly, because capitalists only want regulation that benefits them (like cap gains tax breaks and negative gearing) and not regulation that hurts them and gives others the chance to become capitalists, but that WOULD fix it.

    • In a rising market this will make it virtually impossible to move, so if it fails to cause price drops then everyone will be screwed worse that they are now.

      • No it wouldn’t. It would just make those who are required to pay capital gains taxes be on a more even footing than those of us not pyramiding wealth by flipping.

      • Actually it would hobbit, if you lose 90% of capital gains you have received, you would not be able to buy an equivalent house without putting in money to cover 90% of the capital gain. It wouldn’t put you on an even footing with existing owners, they just wouldn’t sell. See discussion on the influence of stamp duties for similar effect.

      • Not sure what you’re talking about “other owners” don’t have money from that house in the bank. They’ve got it in property where it’s less liquid. The people you’d be competing with are other investors flipping and first home buyers, all of whom would be in the same capital-poor situation. Additionally, the value of the “other owners”‘ property would be lower due to the lower value of property as an investment. Yeah, I kinda think it still would fix it, but that it’s politically impossible until the renting class outnumbers the owning class.

      • It should not be difficult to build in a CGT exception for the “immediate” (say, within six months) purchase of a replacement PPoR.

        Switzerland (and probably Germany) does something similar – no CGT on the sale of the family home if the proceeds are being used to purchase another family home.

    • We had thechance to take our medicine, and in 2010-11 the slow melt was underway. But when the mining boom went bust (two decades early!) the RBA and Government panicked and encouraged Bubblius Maximus. The only way to fix this will be forced upon us by circumstances outside our control.

    • Surely they can just get rid of the CGT 50 % discount, and take it back to inflation discount only, like before Peter Costello decided to boost speculators lifestyles !

  4. As a side note, I disagree with Gladys here, on the “Aw, start small and modest like I did.”
    That would be fine if this is a problem that just appeared and she was giving advice to a bunch of new uni grads. But there have been people sitting on the sidelines for 5, 7, or 10 years, saving, waiting for wages to catch up to deposit and monthly payment requirements due to rocketing house prices, and having life calamities hit them along the way like injuries and months of unemployment that depleted their emergency funds.
    Those people need more space than they did 5 or so years prior. Many (not all… some have kids) young 20-somethings just coming into the market would be well-served by that advice. But what of those who’ve been saving for half a decade or longer and have just found themselves outpriced? Is it realistic to ask someone to put their life on hold because they live in a city that serves the property industry and capitalists rather than fair-go wanna-be owner occupiers? I don’t think so. Action is needed to drop prices across the board, not just for poor-investment 1BR dogboxes.

  5. I like the framing of the falls in Sydney as being “gentle”. Classic manipulative presentation of the actual situation.

    According to Corelogic, the Sydney market is dropping at 10-11%pa, and will go negative YoY in less than 2 weeks time. If that rate of decline keeps up for another 8 months, which I suspect it will, then those people who’ve recently taken out million dollar mortgages in Sydney will be looking at $100K haircuts. That is a significant loss of capital in anybody’s terms, and may represent close to 100% loss of equity for the heavily leveraged. This is life changing stuff.

    You’ve only got to look at that video of fat, bearded and unkempt looking Nathan Bitch gibbering like a loony that was posted on MB today to see the effect that these “gentle” falls are having on the specufestor community.

    • matthew hoodMEMBER

      LSWCHP, I have really appreciated the house price updates you give though the comments. Keep it up.

      • Cheers mate. I’ve picked Saturday 24th Feb for the day that Sydney house growth goes negative YoY. I think that will be a historic event for the Australian economy, and the publicity around it will really start to put the frighteners on all those people around the country who have “invested’ in property at the expense of their fellow citizens.

        What sort of idiot would want to borrow huge amounts of money to “invest” in an illiquid asset class that has returned negative YoY growth?

      • It won’t be “liquidated” It will be towed away by a big bearded heavy dude. Whether he likes it or not…

    • No Reusa rebuke with a LOLZ and mocking of pessimistic losers to stem this thread.
      Maybe there was a price/value epiphany over the weekend in between the relations.

  6. I agree that FTB grants are just plain stupid but that doesn’t mean that we don’t need them. Like it or not the housing genie lives on in the hearts and minds of all young Australians. They’ve incorporated it into their daily speech with phrases like (Housing ladder)…ffs they teach this housing ladder stupidity in schools to our next generation of budding economists. Reality is the RE brain bug lives on, I suspect it’ll take at least 2 rounds of substantial losses before real fear returns to the buyers eyes.
    In the mean time all that stops most young people from buying a house is the necessary deposit so FTB grants are a given..

    • Don’t forget us migrants who want a roof over us in our old age (the pension sure won’t provide for rents anywhere near the kind of infrastructure an oldie needs.)

  7. Maybe the more you pay for a house, the less you get in assistance or stamp duty reduction etc.

    Support the “battler”

  8. Happy to have encouraged young & dumb into making a purchase they’ll spend 2 decades regretting.
    Once that stamp duty dries up I guess they can then begin the land taxing of youth who are already in over their heads. Its ok, by the time they recover they’ll be in their 50s, still 20 years from official retirement age for our gen!