The new Victorian Liberal Government’s move to provide a 20% cut to Stamp Duty will have bankers wringing their hands.
The market price for a house will vary little. There will be no saving for First Home Buyers. A 20% reduction for barely 15% of the market (FHO’s) will not be enough to force prices down. The prevailing market price will be maintained.
Such market forces will see that what we don’t pay to the government will soon be replaced by what we do pay to banks via our mortgages. With Westpac announcing a 14% jump in Net Profit After Tax of $4bn, this is just what the everyday person needs.
Treasurer Wells states:
“The Coalition Government understands how long it takes to save up for your first home and that massive stamp duty taxes are often the difference between the excitement of making a successful bid and the disappointment of being locked out of the property market,”
Pity that first home owners are still competing with negatively geared investors, for whom the $5,174 saving in stamp duty on the median house price in March 2011 would be a drop in the ocean. They can outbid the FHO with ease.
The Victorian government goes on to triumphantly announce:
Eligible first home buyers are entitled to a $7,000 grant on an established home, valued up to $750 000 while eligible first home buyers of a new home up to a value of $600,000 are entitled to a bonus of $13,000 in metropolitan Melbourne, with an additional regional new home bonus of $6,500.
Most prospective home buyers understand that the FHOG is in effect a sellers subsidy, as we have repeated continuously for over a decade.
A failure of economic understanding by government economists and their realm of advisors will again see young people paying the price. How many times do government economists make a mess of housing policy?
Due to the lower government revenue, cuts will have to be made to health and education, areas that young people rely on to get a good start in life.
The news gets worse for small business. The Bailleu government are going to halve such Stamp Duties to 50% by 2014. This puts more pressure on Payroll Taxes to be increased. Perhaps gambling taxes will be increased.
The best way for FHO’s to save money is to join the Home Buyer’s Strike!