Where Sydney homes get a subsidy and by how much

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“Nasty” first homebuyers grants have led to higher prices in western Sydney with most of the scheme’s benefits flowing to homeowners, experts say.

Since 2011, the NSW Government has provided more than $1 billion in assistance to first and new home buyers, including grants and stamp duty exemptions aiming to make housing more affordable. House prices have continued to rise, by about 70 percent since 2012.

The schemes sometime distribute funds in ways that seem odd – homes in Bellevue Hill got more taxpayer assistance ($1,177,567) for people to buy their first place than those looking in Milperra ($612,952).

But overall western Sydney postcodes have benefitted most with places such as Liverpool, Parramatta, and Camden seeing more than $40 million in taxpayer funds used to help people buy their first home via grants in the past five years and tax breaks since July 2009. Meanwhile, across northern and inner suburbs, such as Haberfield, Forestville, Belrose and Annangrove less than $250,000 was granted to people buying their first property over the same period.

North shore home buyers are not being unfairly treated, Dr Laurence Troy from the UNSW City Futures Research Centre said.

“People have been saying for quite a long time that these sorts of policies do not support affordable housing because all they do is add an inflationary pressure into the market,” Dr Troy said.

“First home owner grants are a small part of the tax concessions that are available to owners of housing. Most of the government expenditure on tax concessions related to housing goes into the form of capital gains exemptions and negative gearing.”

recent study of government tax expenditure in the property market found negative gearing and capital gains discounts are “heavily skewed towards those who are more affluent” and raised concerns about the way these policies exacerbate income and wealth inequality.

Dr Troy said the proportions in the chart above would apply at broadly similar rates in Sydney.

“We need to stop treating housing as an investment vehicle and the essential driver of our housing policy and see it as a way to deliver a social good that has multiple benefits across how the society operates both economically and socially,” he said.

Grattan CEO John Daley said negative gearing and capital gains tax concessions “mostly feed through into increasing the price of housing”.

“If you got rid of them they would feed through into reducing the price of housing. Similarly with first home buyers grants if you got rid of them house prices would be a little bit lower on average, materially lower in outer suburbs and no real change on the harbour,” Mr Daley said.

The most fundamental problem with first home buyers grants is that there is no shortage of demand in the housing market, so they just add to property prices, CEO of the Grattan Institue John Daley said.

“It’s the same number of people looking for housing, it’s just that they have more money in their pocket than they did [without a grant],” Mr Daley said. “And because everyone in the area is prepared to borrow an extra $80,000 because they’ve all got an extra $15,000 in their pocket [to leverage] then, it’s happy, happy days for property developers and very bad news for those induviduals.

“They are second home vendors grants really, the person who benefits is the person who already owns a home. The nasty thing about these is that they lead people to pay even more for the house.”

House prices are partly driven by lack of supply due to planning laws and the restrictions they place on building new homes, Mr Daley said.

“Either people accept greater density in their suburb, or their children will not be able to buy a home, and seniors will not be able to downsize in the suburb where they live,” he said.

“The only other choice is you can reduce demand by tapping the brakes on migration.

NSW Treasurer Dominic Perrottet said since the government launched its housing affordability package in July 2017, the number of first home buyers has more than tripled compared with the same period 12 months earlier.

“From the outset, we have been cautious to balance our support for first home buyers against the need to avoid putting upward pressure on house prices, which is why we developed the scheme in close consultation with former RBA Governor Glenn Stevens,” Mr Perrottet said.

“The results speak for themselves – 21,550 new first home buyers across NSW since July last year, including more than three times as many in the north shore area.

“At the same time, we have seen prices moderate, which further improves the choice and affordability for first home buyers,” he said.

First home buyers grants and tax breaks in the 2017/18 budget will rise from $94m in 2015/16, to $276m this year (2017/18).

The latest ABS data shows NSW taxes on property rose by $2.17bn (20.2 per cent), the most in the country, between 2014/15 and 2015/16.

Source: https://www.smh.com.au/politics/nsw/where-sydney-homes-do-and-don-t-get-subsidised-for-sale-20180319-p4z54f.html

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