This chart suggests help for first home buyers in NSW and Victoria is pushing up prices at the lowest end of the market

The New South Wales and Victorian state governments both introduced stamp duty concessions for first home buyers last year, bowing to public pressure to do something to help improve housing affordability.

Recent lending finance data from the Australian Bureau of Statistics (ABS) suggests it’s been a success, seeing the number of first home buyer loans as a percentage of total owner occupier loans rise to 18% in November, the highest proportion since October 2012.

On face value, it suggests the home ownership hurdle facing many prospective first time buyers has been lowered quite a bit, bringing forward demand that would not have otherwise been there.

It’s not the only indicator that suggests stamp duty concessions are having an effect.

As seen in this excellent chart below from ANZ, it’s also having an impact on prices at the least expensive end of the Sydney and Melbourne property markets.

Source: ANZ Bank

The bold bars measure monthly changes in Sydney and Melbourne property prices after seasonal adjustments have been applied. The shaded bars represent price movements in the bottom 25% of both markets

Notice something?

Compared to the entire market, prices for the cheaper dwellings — those which are typically favoured by first time buyers — have outperformed since the stamp duty discounts were introduced.

“The introduction of stamp duty discounts in New South Wales and Victoria is providing some support to the lower end of the market,” says Daniel Gradwell, Senior Economist at ANZ.

“Prices in the lowest 25% of the Melbourne market are now up 8% since the discounts arrived in July, compared to 3% growth in the overall market.

“Even in Sydney, where the whole market has declined by 2.7% over the same period, the lower quartile has been more resilient, with declines of just 0.5%.”

Along with the lending finance data, it suggests the stamp duty discounts are helping many Australians to enter the Sydney and Melbourne markets.

However, as is often the case with measures designed to bring forward demand, the subsequent impact on the lower end of the market risks pushing prices higher across both cities longer-term, creating renewed affordability headwinds for prospective buyers in the future, especially if these discounts are ever reduced or removed.

While some may argue any subsequent price increases may help to boost supply, equally stamp duty discounts may merely be delivering short term gains in return for longer-term pain.

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