In the wake of figures revealing first home-buyer activity has fallen to the lowest level in more than two decades in NSW, a leading property economist has called for first home buyer incentives to be scrapped.

“I don’t think we need grants,” says the senior economist at Australian Property Monitors, Andrew Wilson. “I know a lot of people in the industry believe we [have to have grants] but I believe that … the money that is spent on grants should be allocated more on the supply side rather than the demand side.”

Wilson says funds should, in part, be redirected to building better quality infrastructure, including improved transport and health facilities, in areas where young people want to live.

He has also called for a more streamlined planning process.

“Certainly we need to do things that look at expediting planning processes,” he says.

“I’m not an advocate for free-market approaches to planning – I think that we need to have particular balances for environmental issues as well as neighbourhood character issues, but I think it is always difficult to find that right balance.”

Wilson predicts that first home buyers in NSW will continue to ignore the $15,000 grant that is available to them for the purchase of new properties.

“I’m not sure that that is going to really provide a tick-up in housing construction,” he says of the grant.

“The geographic location of Sydney’s potential broadacre estates means that first home buyers will … start to look at established properties and forgo the grant.”

Wilson is expecting the numbers of first home buyers in NSW to rise this year.

“It is … a question of just how long they remain in queue in terms of being renters,” he says.

“I think it will be sooner rather than later that we start to get those numbers picking up again, particularly in Sydney where the underlying drivers of steep rents … a shortage of rental property and now house prices are starting to climb again.”

Harley Dale, Housing Industry Association chief economist, says he is supportive of the NSW Government’s first-home buyers grant, but has called for a major overhaul of property taxes to alleviate price pressures on new homes.

“In an ideal world, we need to see a fairer taxation system where there’s not as much inefficient cost embedded in the price of housing that is an unnecessary hurdle for first time buyers to try and have to jump over,” Dale says.

“Stamp duty is the one that gets the biggest focus because, A, it tends to add up to quite a bit of money, and B, inside and outside of the housing sector it’s got to be close to the most inefficient tax within the entire Australian system. “But there is a raft of taxes that apply to new housing in Australia, for example, you pay GST on new housing but you don’t pay GST on existing property.

“It all adds up to the fact that if you take Sydney as an example, and if you look at someone trying to purchase a house-and-land package as a first-time buyer, then over 40 per cent of what they’re paying is actually tax.”

Posted by Carolyn Boyd – Domain (The Age) on 12th February, 2013