Understanding the changes to the First Home Owners Grant

Real estate agents in Perth, as well as many potential first home buyers, were stunned by a recent decision of the WA Government. On 8 August, the WA Government did the unthinkable: it cut WA’s FHOG for established homes from $7,000 to $3,000. Deciding that this wasn’t enough to bury first home buyers, the state then raised land tax by 12.5%. These changes are expected to be in place by the end of October.

House and Keys

The only mitigating factor is that the FHOG for new homes will be increased to $10,000, but the WA Government fully expects less people to take advantage of the raise than the cut, resulting in an overall increase in tax revenue.

According to the Real Estate Institute of WA (REIWA), this decision could keep as many as 70% of first home buyers from purchasing a home until they have saved more of a deposit.

The land tax increase has made property more expensive particularly for investors who own more than one property, while the decrease in the FHOG ensured that some first home buyers won’t have enough money to buy a first home yet.

According to Treasurer Troy Buswell, 57% of those who own homes will spend $40 or less to comply with the land tax increase due to what he called “anticipated reduction” in property prices and value.

We believe that the “anticipated reduction” in the price of property is absurd. In all of the time that records have been kept, Free Sale Appraisal, as well as the buyers, can attest to that.

In other words, prices have almost always gone up every year. We saw a severe trough due to the Global Financial Crisis, but prices are on their way back up again. Even if they level off, it still means people are going to pay higher taxes.

So, all the government has “accomplished” with this decision is to make it harder for first home buyers while using a a speculative and highly-unlikely scenario as justification for raising the land tax.

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