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Carrots for first buyers

The market downturn offers greater incentive to buy a first home than government rebates.

For first home buyers Sophie Arnold and Nicolaas Unland, the state government's decision to offer a partial rebate on stamp duty for those purchasing their first property came as a welcome move. With the $3474, they would be able to claim back in stamp duty and the $20,000 they would receive in first home owners' grants, the couple decided against buying an established home, which would mean extra costs down the track. Instead, they bought a new $420,000 home in Mooroolbark.

''We thought we could spend the extra money to get it and we don't have to do anything to it,'' says Ms Arnold, a 24-year-old interior decorator who manages a curtain and blind shop in Lilydale.

''Whereas some of the established homes we were looking at … you've got to spend another $20,000 to get it to where you want it to be.''

Announced with the last state budget, the rebate is being progressively rolled out, initially as a 20 per cent reduction, with a further 10 per cent to be knocked off in January 2013 and 2014 respectively and then a final 10 per cent reduction in September 2014, bringing the total rebate to 50 per cent of the stamp duty usually paid by first home buyers. It applies to homes that cost or are built for $600,000 or less. The stamp duty rebate, which must be applied for after settlement, complements the existing first home owner grants. Under this scheme, buyers are eligible for a grant of $7000 when purchasing a home up to the value of $750,000. If the home is newly built and its price does not exceed $600,000, there is an additional bonus of $13,000. Buyers in a regional area, in addition to the previous two figures, will get another bonus of $6500 if the price or construction does not exceed $600,000.

State government figures show that more than 28,000 people claimed the first home owner's grant for an established or new home in the last financial year alone. Earlier this month, a spokeswoman for Treasurer Kim Wells told The Sunday Age that the stamp duty cuts had assisted more Victorians to buy their first home, with government figures showing 1428 buyers had collectively saved more than $3.96 million in stamp duty under the program so far.' However, Greville Pabst, chief executive of the WBP Property Group, says the stamp duty concessions so far appear to have had ''little impact'' on the number of first home owners entering the market.

''While previous schemes have led to a spike in activity from this buyer group, the staggered incentive has created little initial interest from first home owners of both established houses and new houses,'' he says.

Robert Larocca, spokesman for the Real Estate Institute of Victoria (REIV), says the organisation welcomed the move to cut stamp duty. But he said the REIV had lobbied for stamp duty on first home purchases to be dropped altogether.

''Every dollar counts when you're buying your first home and the [initial] 20 per cent cut will save you between $2500 and about $5000 depending on the price of the home. When you're a first home buyer, that's significant - that can be a bit of extra furniture, a good fridge, those sorts of things, and it will all be welcomed.''

Source: The Age Domain