Who would have thunk it! The NSW Government’s recent decision to grant major stamp duty relief to first home buyers (FHBs) is set to flow to vendors, who are planning to jack up prices. From The AFR:
Sydney home sellers are pushing up their asking prices to take advantage of the cuts in NSW stamp duty and increased demand from first-home buyers, real estate agents say…
Starr Partners’s Doug Driscoll has been fielding calls from vendors in Sydney’s west in that price bracket who want to “list their homes for slightly more, given that first-home buyers will soon have more to spend”.
“When first-home buyer grants were introduced a few years ago, as a group, we saw the same thing,” he said. “The market needs to find its natural level, as otherwise these measures could prove counter-productive and possibly even lead to an artificial increase in prices”.
Mr Starr also said the cuts were less of an “affordability” solution and more of a strategy to drive more first-home buyers into apartments…
“With far fewer investors as a result of the macro-prudential measures and tens of thousands of new apartments in the pipeline, who is going to buy them otherwise?” he said…
Ray White’s Ercan Ersan said an apartment seller in St Peters, who had a listing of about $600,000 to $650,000, wanted to delay his sales campaign to July 1… “This will give them a chance to extract every last dollar. They expect there will be more interest and that puts pressure on competition and ultimately drive a higher price.”
Such impacts were entirely predictable. Almost any economist not captured by the property lobby will tell you that increasing FHB’s ability to pay will just drive up demand and prices, making ‘housing affordability’ even worse (other things equal).
In his housing affordability report to the NSW Government, Glenn Stevens explicitly warned that any demand-side measure aimed at FHBs would likely be counter-productive:
…measures that seek to assist first home buyers could be more targeted. As a general observation, I personally do not favour these measures and I could not recommend extending them…
After all, giving people money so that they can afford high prices not only does nothing to lower prices, it is almost a counsel of despair…
Current RBA Governor, Phil Lowe, also testified last month that “you don’t fix [housing] affordability by boosting demand”.
As usual, the fig leaf of ‘housing affordability’ has been used by a government to prop-up the housing market, yet again throwing FHBs to the wolves.
