Image: This Balmain waterfront property in Sydney was auctioned at the weekend for $6.1 million, well over the $5.5 million reserve. Supplied
Victoria’s decision to waive stamp duty for many first homebuyers will fast become counter-productive, stimulating an already booming residential market, property analysts said.
The state government has abolished stamp duty for first-time buyers for purchases below $600,000 even as housing markets in Melbourne and Sydney continued to fire at the weekend, with auction clearances above 80 per cent.
Under the Victorian plan those buying a home valued between $600,000 and $750,000 will also be eligible for a concession.
“The idea of the initiative is well-intended but I think it’s going to be a disaster,” said Wakelin Property Advisory’s Paul Nugent.
“It’s going to lead to tremendous capital growth in that sub-$600,000 sector. It basically becomes a grant to the vendors more so than the purchasers.”
SQM Research’s Louis Christopher said cutting stamp duty on all residential transactions would be more effective by encouraging more sellers.
Restricting the waiver to first homebuyers only would simply stimulate demand in an already overheated market, he said.
“This is only going to help first homebuyers for three or four weeks then the price rises will nullify the apparent gain.”
Help for battlers
“This will help level the playing field,” he said.
Developers also embraced the new concession, including Villawood’s Rory Costelloe, who produces greenfield lots in Victoria, NSW and Queensland.
“First homebuyers were disappearing in the market,” he said. “This welcome announcement will also allow second homebuyers to sell their existing home to the first homebuyer market and upgrade themselves, so everyone’s a winner.”
In further efforts to even the odds, Victoria has removed off-the-plan stamp duty concessions on investment properties.
As well, a Vancouver-style tax on empty properties is being brought in, levied at 1 per cent of the capital improved value, to encourage owners to make homes available for purchase or rent.
Among a series of measures to combat housing unaffordability, Victoria is also introducing a pilot scheme in shared equity, taking a stake of up to 25 per cent in 400 homes.
The co-purchasing arrangement allows first homebuyers to get into the market with smaller deposits and service smaller mortgages.
The Victorian initiatives were announced as residential property markets in Sydney and Melbourne fired on the weekend, with clearance rates in both cities surging past 80 per cent.
The clearance rate in Melbourne hit 80.6 per cent, according to Domain figures. That result was achieved from a relatively large amount of auctions – 1183 listings – and it is the second week Melbourne clearances have pushed above 80 per cent.
Nor is there any sign of slowdown in buyer appetite in Sydney, where the clearance rate was at 80.5 per cent on CoreLogic figures. It is the fourth week in a row that clearances have hit 80 per cent or more.
Among the highlights in Sydney, the Balmain home of academic Professor Richard Wright sold under the hammer for $6.1 million, well above its $5.5 million reserve.
It’s the first time the four-bedroom home, set on a large waterfront block of 600 square metres, has been put to the market in more than 50 years.
The Sydney University emeritus professor of anthropology is well-known in the field of forensic archaeology for his work on mass graves and human rights.
“It was such a privilege to sell such a rare and unique home for such an amazing man,” said Belle Property Balmain co-principal Monique Dower, who handled 72 Campbell Street with colleague Rita Lopresti.
“The sale price is a testament to the desirability of waterfronts in Balmain.”
The strong results in Sydney and Melbourne come in the same week that Paris-based OECD warned on Australia’s vulnerability to a house price collapse.
SQM Research’s Mr Christopher said the clearance rates showed that buyer demand was holding up even as more sellers come back into the market.
How long the market maintains its current pace was partly dependent on whether the bank regulator, the Australian Prudential Regulation Authority, steps in again to curb investor borrowing, he said.
“The probability is now increasing they may well come in before mid-year to press on the banks to put in even tighter restrictions.”
Lenders, such as Bankwest, a subsidiary of Commonwealth Bank of Australia, have already been moving to squeeze the amount and cost of credit available to investors.