The ACT government has reduced its First Home Owner Grant

By Michael Mata
On Jan. 1, the struggle to ascend the property ladder in Canberra became a little more challenging for first-home buyers. The ACT government has reduced its First Home Owner Grant (FHOG) to $7,000. The grant was originally increased to $12,500 back in September 2013 with the aim of encouraging more first-home buyers to enter the property market.

Based on housing finance data from the Australian Bureau of Statistics (ABS), the ACT government’s initiative appears to have been successful. The number of approved first-home buyer loans rose to 1,492 during the first 10 months of 2014; this rose again to 1,546 during the first 10 months 0f 2015.

The reductions to the FHOG were originally announced in the ACT government 2015-2016 budget, with the first cut occurring on Jan. 1, 2016 (reducing the budget to $10,000). The final reduction—which brought the grant down to its original amount of $7,000—went into effect on Jan. 1, 2017.

These reductions have had an impact on homebuyer loans. Data from ABS reveals that first-home buyer loans approved over the first 10 months of 2016 fell to 1,432. The decline is pretty significant, considering the current low interest rate environment and the healthier labour market.

Furthermore, the FHOG has been solely retargeted to new and substantially renovated properties, and is no longer available for the purchase of established properties.  

Thankfully, there is a silver lining for those struggling to enter Canberra’s property market. The city has experienced a great deal of development in recent years, and the influx of unit and apartment stock has pushed prices down.

“Units and apartments are a lower price point entry than a detached house and many developments are specifically targeted to the first time buyer,” said Nicola Powell, data scientist for the Domain Group. “This should help to ease the financial burden associated with taking the first step on the property ladder.”
 

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