Finally, a 'bucket of hope' for first-home buyers

If there’s one question I am asked about more than any other it’s this: with Australia’s soaring housing costs, lack of supply and a rental crisis, what can we actually do, not just talk about, but do, to help first-home buyers get into the market?

Well, finally, maybe something.

While you’re going about your usual day, there’s proposed legislation before the New South Wales parliament that may be the biggest sign of hope for a generation of first-home buyers. If passed, it means NSW will be in reaching distance of offering a genuine solution.

One of the greatest obstacles for first-home buyers is the ability to save a 20 per cent deposit that is required to buy a mortgaged property. The reality of that is this: if you live in Sydney and you’re aged between 25 and 34, it could take you 16 years (yes, 16 years) to save that deposit.

There’s long been discussion about stamp duty being the laziest tax around. The NSW government is proposing to give first-home buyers the choice to shun the lumpy stamp duty payment upfront in exchange of a smaller more manageable annual land tax on a property they purchase.

Dubbed the First Home Buyer Choice scheme (note the word “choice”), if the legislation is passed a trial would be available as soon as January.

For any naysayers, those who are saying this will be a “forever tax” (and which tax isn’t?) please do this: go and find a wonderful young person in their mid to late twenties. If you’re not sure where to look, try going to the home of an older person in their fifties or sixties – you’ll most likely find their kids there, still living at home. Ask all occupants how they feel about that.

And if they’re not still living at home, they’ll be paying staggeringly high rent amongst the lowest vacancy rates Australia has ever experienced. Ask them then how they’re fairing with their ability to save for a deposit. You’ll need a box of tissues at hand.

If you’re feeling emboldened, ask how they would feel if they could dump stamp duty and channel that money towards their deposit. As an example, the government’s calculator shows a first-home buyer who buys a property for $1.2 million will pay around $2,500 in land tax annually, rather than over $50,000 in a one-off stamp duty payment they would be hit with today.

That’s a helluva lot of extra money to put towards a deposit.

And this proposal is a choice for each buyer to decide on. The decision does not become bolted on to the property. First-home owners will have the ability to consider where the sweet-spot is when it comes to breaking even. Rule of thumb says around 10 years (which is longer than most young buyers stay in their first home). And if the owner sells in the future, the next buyer has the same option afforded to them.

This is not a silver bullet in tackling the vexed issue of homeownership in Australia, but it’s a step forward for the young people of NSW. If successful, in the country’s biggest property market, it may well be seen as a test case for other states to follow.

It’s also the biggest bucket of hope most first-home buyers would have most likely ever seen.