Canberra first-home buyers' struggle worsens with grant changes

Rising house prices have been a constant hurdle first home buyers have faced throughout 2016.

Canberra’s property market has been propelled forward by the lack of housing stock and relatively consistent demand that has pushed house prices north. For those buyers unable to save the hefty lump sum deposit, mortgage insurance has been the only way to secure a first home. This add a substantial amount to the initial cost of buying.

As of January 1 the struggle became a little bit harder. The ACT Government first home owner grant was reduced to $7000. The grant was lifted to $12,500 back in September of 2013 as a stimulus measure to encourage first time buyers to the market.

Based on ABS housing finance data the initiative appears to have been a success. The number of first home buyer loans approved rose to 1492 loans during the first 10 months of 2014 and rose again to 1546 during the first 10 months of 2015. This is not the highest proportion of first home buyer loans financed when compared to non-first home buyer loans. During this period market conditions were somewhat overshadowed by the economy, and public sector cutbacks meant job security was an issue for many.

As announced in the ACT government 2015-16 budget, the grant was to be reduced. The first cut occurred as of January 1, 2016, to $10,000. The final reduction down to the original $7000 grant amount came into effect as of January 1, 2017.

ABS data reveals first home buyer loans approved over the first 10 months of 2016 fell to 1432. Considering the current low interest rate environment and better conditions surrounding the labour market, the fall is disappointing.

To be eligible for the first home owner grant, buyers are also restricted to purchasing new or substantially renovated property. There is a silver lining for those struggling to get a foot on the ladder. Canberra has experienced significant amounts of development in recent years. The influx of unit and apartment stock has pushed prices down. Units and apartments are a lower price point entry than a detached house and many developments are specifically targeted to the first time buyer. This should help to ease the financial burden associated with taking the first step on the property ladder.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell