{"id":4783,"date":"2017-05-07T10:52:39","date_gmt":"2017-05-07T00:52:39","guid":{"rendered":"http:\/\/www.catebakos.com.au\/?p=4783"},"modified":"2017-05-08T22:38:01","modified_gmt":"2017-05-08T12:38:01","slug":"will-first-home-buyer-stamp-duty-changes-skew-market","status":"publish","type":"post","link":"https:\/\/www.catebakos.com.au\/staging\/will-first-home-buyer-stamp-duty-changes-skew-market\/","title":{"rendered":"Will the First Home Buyer Stamp Duty Changes Skew Our Market?"},"content":{"rendered":"<p class=\"lead\">The first half of 2017 is shaping up to be defined by our business as the change of our normal blend. We have historically helped a larger proportion of&nbsp;<em>investors<\/em> in their quest to build a wealthier future; and our blend of&nbsp;<em>home-finders <\/em>has generally sat between 20-40% of our active clients. The&nbsp;<em>Home-Finder<\/em> client numbers currently sit just above 50% for us right now.<\/p>\n<blockquote><p>We can put this down to two changed elements in our current landscape.<\/p><\/blockquote>\n<ul>\n<li>The incredibly difficult buying conditions in this under-supplied market are proving tough for many buyers.&nbsp;<\/li>\n<li>Investment lending has completely tightened up and clamped many investment spend-limits. APRA&#8217;s enforced limitations on bank lending to this segment of buyers has indeed taken effect and investor&nbsp;numbers are indeed diminishing, as are investor budgets. Lender appetites for equity releases are low and scrutiny is high. Many borrowers who purchased investments a year ago wouldn&#8217;t even qualify to borrow the same amount now. Loan to Value Ratios (LVRs) have been reduced for investors and just recently the <em>capitalisation<\/em> of Lender&#8217;s Mortgage Insurance at 90% LVR was struck. What this means is&nbsp;<em>investors<\/em> need to fund the LMI themselves; the lender will no longer simply add the premium to the balance of the loan. To illustrate the magnitude of the premium, a $1M purchase at 90% LVR will cost around $36,000.^<\/li>\n<\/ul>\n<p>Lending conditions are quite different for home buyers though. Lenders are still allowing some eligible applicants to borrow as high as 97% of the value of the property when structured as a 95% LVR loan with partially capitalised LMI.&nbsp;<\/p>\n<blockquote><p>It is fair to say that home buyers are driving our strong market performance right now.<\/p><\/blockquote>\n<p>At almost every auction I&#8217;ve attended this year, the surprisingly strong results have generally coincided with an emotional squeal and joyous tears in the crowd when the auctioneer&#8217;s hammer has finally fallen.<\/p>\n<p><strong>This week when our state budget was announced, it was no surprise that our government decided to offer higher Stamp Duty Concessions for First Home Buyers.<\/strong> After all, we are the most expensive state in the country when it comes to Land Stamp Duty and our radio talkback hosts have been having a field day with the challenges our first home buyers face in relation to housing affordability.<\/p>\n<blockquote><p>Will the higher concessions help or&nbsp;<em>hinder<\/em> the very buyers we are trying to assist after July 1?<\/p><\/blockquote>\n<p>We believe that the hiked concessions will&nbsp;<strong>hinder<\/strong> first home buyers. While the calculation shows the savings on offer to those who are eligible for the&nbsp;<em>free<\/em> stamp duty up to $600,000 (and concessions from $600,001 to $750,000), what they&nbsp;<strong>don&#8217;t<\/strong> show on the State Revenue Office site is the impact of higher buying power in the market.<\/p>\n<p>Some will argue, but we predict that the buying conditions for first home buyers in the $400,000 to $650,000 market space will be particularly difficult and&nbsp;<strong>competitive.<\/strong> The sale values won&#8217;t simply reflect the additional $13K or so which the buyers have preserved in their pockets. They will reflect the&nbsp;<strong>higher borrowing power<\/strong> that each buyer has access to based on a stronger capital contribution.&nbsp;<\/p>\n<blockquote><p>When buyers leverage at a high LVR, their borrowing power is significantly enhanced with that additional $13K or so.<\/p><\/blockquote>\n<p>This chart shows the broad changes to borrowing power for five generalised segments; eligible first home buyers with $53K, $63K, $73K, $103K and $143K in savings. <b>For illustrative purposes <\/b>the chart&nbsp;roughly models the difference in borrowing capacity for buyers who either buy between now and 30 June, or&nbsp;for those who buy <em>on or<\/em>&nbsp;<em>after<\/em> July 1. It assumes 90% LVR plus&nbsp;<em>capitalised LMI<\/em> borrowings to demonstrate how hard these buyers can stretch their reach if they are happy to take on a level of LMI (Lender&#8217;s Mortgage Insurance) which most lenders have on offer to those who qualify.<em>&nbsp;<\/em><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" width=\"1363\" height=\"468\" class=\"alignnone size-full wp-image-4789\" src=\"http:\/\/www.catebakos.com.au\/wp-content\/uploads\/2017\/05\/Stamp-Duty-Table2-1.jpg\" alt=\"Stamp Duty Table2\" srcset=\"https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Stamp-Duty-Table2-1.jpg 1363w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Stamp-Duty-Table2-1-300x103.jpg 300w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Stamp-Duty-Table2-1-768x264.jpg 768w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Stamp-Duty-Table2-1-1024x352.jpg 1024w\" sizes=\"auto, (max-width: 1363px) 100vw, 1363px\" \/><\/p>\n<p>What is really interesting is the changed borrowing power at the lower savings level. Buyers whose savings restricted them from higher borrowing power will wield some power particularly in the $400,000-$700,000 segment of the market.&nbsp;<\/p>\n<blockquote><p><strong>What we believe this will cause is a&nbsp;<em>distortion<\/em> to values within this range.<\/strong><\/p><\/blockquote>\n<p>Depending on the pent-up demand by First Home Buyers when changes go live on 1st July, we could see a floodgate swing open in a short space of time. We do anticipate the price movement in this segment of the market will be strong.<\/p>\n<p>This model shown does not take into account Off The Plan (OTP) sales, but based on the relatively small differential for OTP stamp duty charges within the $400K-600K increments, we believe that the&nbsp;<em>established<\/em> property market will be the most seriously price-impacted.<\/p>\n<p>The properties which we believe will be affected most dramatically include older apartments, villa units, townhouses and houses up to $750,000.<\/p>\n<blockquote><p>This does prompt the question: are FHB&#8217;s who can buy now better off buying&nbsp;<em>before&nbsp;<\/em> the floodgate opens?<\/p>\n<p><strong>We believe so.<\/strong><\/p><\/blockquote>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-4790\" src=\"http:\/\/www.catebakos.com.au\/wp-content\/uploads\/2017\/05\/Baxter1.jpg\" alt=\"Baxter1\" width=\"278\" height=\"161\" srcset=\"https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter1.jpg 1149w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter1-300x173.jpg 300w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter1-768x442.jpg 768w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter1-1024x590.jpg 1024w\" sizes=\"auto, (max-width: 278px) 100vw, 278px\" \/> <img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-4791\" src=\"http:\/\/www.catebakos.com.au\/wp-content\/uploads\/2017\/05\/Baxter2.jpg\" alt=\"Baxter2\" width=\"278\" height=\"160\" srcset=\"https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter2.jpg 1149w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter2-300x173.jpg 300w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter2-768x442.jpg 768w, https:\/\/www.catebakos.com.au\/staging\/wp-content\/uploads\/2017\/05\/Baxter2-1024x590.jpg 1024w\" sizes=\"auto, (max-width: 278px) 100vw, 278px\" \/><\/p>\n<p>Yesterday&#8217;s purchasers in Baxter decided to purchase of their own accord. We proudly assisted two special buyers with their first home purchase in the sub-$500,000 range and despite paying ~$10,000 more stamp duty now than what they&nbsp;<em>could<\/em> have faced post-1 July, they secured their home in <strong>their budget<\/strong>.&nbsp;<\/p>\n<p>The changes certainly warrant careful consideration and discussion.<\/p>\n<blockquote><p><strong>At this changing time, more than ever &#8211; first home buyers need the assistance of a <span style=\"text-decoration: underline;\">knowledgeable and responsive mortgage broker<\/span>.&nbsp;<\/strong><\/p><\/blockquote>\n<p>Lending policy is changing almost daily and the conditions above cannot be guaranteed to apply.<\/p>\n<p><strong>The cited approximated figures in the chart are&nbsp;for illustrative purposes only and are&nbsp;general in nature.<\/strong><\/p>\n<p>SRO calculators have been used and LMI (Genworth) online calculator used:<\/p>\n<p><a href=\"https:\/\/extranet.sro.vic.gov.au\/SRO\/SROCalcs.nsf\/transfer?OpenForm\">SRO Land Stamp Duty &nbsp;Current<\/a><\/p>\n<p><a href=\"http:\/\/www.sro.vic.gov.au\/node\/5814\">SRO Table post-July<\/a><\/p>\n<p><a href=\"http:\/\/www.yourmortgage.com.au\/calculators\/mortgage_insurance\/result\/?sid=3549820-glyh0-mortgage_insurance\">Genworth Lenders Mortgage Insurance Calculator<\/a><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The first half of 2017 is shaping up to be defined by our business as the change of our normal blend. We have historically helped a larger proportion of&nbsp;investors in their quest to build a wealthier future; and our blend of&nbsp;home-finders has generally sat between 20-40% of our active clients. The&nbsp;Home-Finder client numbers currently sit&#8230;  <a href=\"https:\/\/www.catebakos.com.au\/staging\/will-first-home-buyer-stamp-duty-changes-skew-market\/\" class=\"more-link\" title=\"Read Will the First Home Buyer Stamp Duty Changes Skew Our Market?\">Read more &raquo;<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ngg_post_thumbnail":0,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[10],"tags":[],"class_list":["post-4783","post","type-post","status-publish","format-standard","hentry","category-sundayblog"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts\/4783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/comments?post=4783"}],"version-history":[{"count":13,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts\/4783\/revisions"}],"predecessor-version":[{"id":4801,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts\/4783\/revisions\/4801"}],"wp:attachment":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/media?parent=4783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/categories?post=4783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/tags?post=4783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}