The issue of rising housing prices has been a growing concern for economists and policy makers, as first home buyers are increasingly being pushed out of the market.
This article will discuss planned changes to the First Home Owner Grant and will be the first segment in a three part series covering the Victorian government’s recently proposed measures to help first home buyers enter the market.
It is important to note that all initiatives are subject to approval by the Victorian Parliament, with a decision likely to come down in June 2017.
Firstly, who is a first home buyer?
The First Home Owner Grant (FHOG), as its name suggests, is exclusive to first home buyers. To qualify as a first home buyer, all purchasers and their partners must satisfy key FHOG criteria.
This includes, but is not limited to:
- All purchasers must be over the age of 18
- At least one purchaser must be an Australian Citizen or Permanent Resident
- At least one of the purchasers must use the home as a principal place of residence for a continuous period of at least 12 months, starting within 12 months of the settlement date
- Detailed restrictions on previous home ownership can be found on the State Revenue Office website (Link: sro.vic.gov.au/first-home-owner#fhog)
What are the proposed changes?
Currently, first home buyers who purchase or build a new home valued up to $750,000 are eligible for a grant of $10,000. In this case, a new home can refer either to a newly built home, vacant land on which to build a new home, an existing property which is being sold for residential purposes for the first time or a land/building package.
Under the Victorian government’s proposed changes, this grant amount will be increased to $20,000 specifically for new homes purchased in regional Victoria, within municipal councils including Geelong, Ballarat and Bendigo. That said, purchases of new homes outside these areas will still be eligible for the original $10,000 grant.
Proposed changes are set to apply to contracts of purchase and contracts for comprehensive home building plans entered into in the three-year period from 1 July 2017 to 30 June 2020. Alternatively, if construction of a new home by an owner builder occurs within this period, they will be eligible for the grant.
What does this mean?
The Victorian government hopes that doubling the grant will increase the appeal of living outside Melbourne for young families, with increasing opportunities to pick up a good priced home with the added benefit of a $20,000 injection into their deposit. This move should contribute to ease the pressure on housing prices and lack of affordable stock in Melbourne’s inner city suburbs.