By Jonathon Chancellor, Property Observer
As hard as it is for first home buyers to secure their place on the Sydney property ladder, it is important not to exaggerate the effect of their absence.
Investors are instead taking up the listings at the cheaper end, so the market is ticking over.
Sitting on the sidelines also means the first timers aren’t mugs, overpaying in the current boom, and so will escape the hurt of the higher interest rate shock when it eventually hits.
First home buyers have typically played a volatile role in our housing market. They can rush in and can also be quiet for lengthy periods.
There was an amazing spike in activity after the global financial crisis with government incentives thrown at first timers bringing forward any number of years of demand ahead of schedule.
Not surprisingly the numbers for the subsequent few years have been subdued, indeed at the lowest level since data has been collected.
Of course renewed wider stamp duty concessions could always be used to attract first home buyers back into the marketplace especially if they were also applied to established homes rather than just new homes.
The state government has saved billions by limiting concessions to new house/new apartment first time buyers since 2012.
My biggest concern regarding market inactivity is with two other key buying demographic age groups.
These are the growing families who are increasingly staying put to build up or out on their suburban blocks.
And then there are the reluctant downsizers.
Both demographics are creating roadblocks for the orderly flow of market listings, and no doubt contributing to the escalating trend of less stock on the market, which means prices keep going up quicker than normal.
The elderly staying put means their four and five bedroom homes are long under utilised, sometimes for decades.
Their reluctance to move isn’t solely due to the desire to keep the happy family memories intact.
They actually want housing options such as single level patio garden homes that are few and far between in their desired neighbourhoods.
Additionally they are not that keen on paying stamp duty on any downsized property.
They are old enough to recall the tax has been at current 4.5 percent level since the 1986 Unsworth government. The median stamp duty was $1500.
Last year’s 15 percent increase alone in the median Sydney property price means they as downsizing buyers will need $33,000 duty for a $850,000 median price acquisition.
If Premier Gladys Berejiklian is smart she will introduce a postponed partial payment option catering for each of these demographics.
The cost of these deferments will likely be offset by higher sales activity.
The government is after all eyeing another record $7 billion annually to be collected from residential stamp duty.
This article first appeared in the Daily Telegraph.