First Home Buyers Support Schemes in Australia - Wiley Online Library

The Australian Economic Review, vol. 44, no. 4, pp. 468–79

Data Survey First Home Buyers’ Support Schemes in Australia Mardi Dungey, Graeme Wells and Sam Thompson∗

1. Introduction Government policy to encourage home ownership has a long history in Australia. For example, the War Service Homes Act 1918 (Cwlth) made provision for 45 year loans to ex-service personnel to facilitate home purchase. Since then, home ownership has been encouraged by a variety of measures. A short and incomplete list includes the non-taxation of imputed rent on owner-occupied houses, exemption from capital gains tax, provision of incentives to financial institutions to finance construction of owneroccupied homes, employer-provided incentives for home ownership as part of salary packages and schemes directed towards disadvantaged socio-economic groups.1 These policies reflect a broad consensus as to the virtues of home ownership, which have been articulated many times over the years. Menzies (1942) is representative: The material home represents the concrete expression of the habits of frugality and saving ‘for a home of our own.’ Your advanced socialist may rave against private property even while he acquires it; but one of the best instincts in us is that which induces us to have one little piece of earth with a house and a garden which is ours; to which we can withdraw, in which we can be among our friends, into which no stranger may come against our will.

∗ Dungey: School of Economics and Finance, University of Tasmania and Centre for Financial Analysis and Policy, University of Cambridge; Wells and Thompson: School of Economics and Finance, University of Tasmania. We thank officers in revenue offices and treasury departments in the states and territories for their generous assistance in providing historical records from which the data in this article have been derived. C

Most Australian households live in a dwelling in which they have some financial stake, either as an outright owner (35.1 per cent) or by paying a mortgage on a property in which they currently reside (34.7 per cent).2 While some analyses (Productivity Commission 2004, for instance) have questioned the merits of broadly based policies to promote owner-occupation as the preferred form of housing, there has been little empirical analysis of the extent to which specific policies have affected the home ownership decision of households. For example, although a number of papers examines the incentives provided by alternative tax treatments—most often, differential rates of capital gains tax and the ability to purchase rental properties under negative gearing3 —there appears to have been insufficient temporal or spatial variation in these tax regimes to assess their quantitative effects. This article describes a new quarterly dataset comprising gross and net rates of assistance provided by cash grants and stamp duty concessions to first-time owner–occupiers from 1990 to 2010. These grant and concession schemes comprise a major public policy program; for example, 1.4 million first home buyers (FHBs) took advantage of the Commonwealth Government’s FHB support schemes from 2000–01 to 2009–10, with payments between $7000 and $21 000, depending on the time at which the grant was made and whether the purchase involved a newly constructed dwelling (Steering Committee for the Review of Government Service Provision 2009, Table 17). State-based schemes are of similar size in terms of cash outlays and foregone revenue. The first objective of the article is to detail the history of several forms of government

2011 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Published by Blackwell Publishing Asia Pty Ltd

Dungey et al.: First Home Buyers’ Support Schemes in Australia assistance to FHBs who are owner–occupiers from different levels of government over the period since 1990. There has been substantial variation in assistance provided across states and territories and over time. Within different jurisdictions, schemes are differentiated by categories of buyers and property characteristics. In general, for example, new home builds have attracted higher subsidies than purchases of existing housing stock. In some jurisdictions, rural housing has attracted more funding, while in others, inner urban housing has been more heavily subsidised. This plethora of arrangements has not, to our knowledge, been previously documented for the panel of states and territories. The second objective is to outline the derivation of time series data for the gross rates of assistance (grants and concessions) afforded by schemes directed towards FHBs. The data are available in Thompson, Dungey and Wells (2011). Currently, there is no similar database on the support schemes for FHBs in Australia, or indeed internationally. Lawson and Milligan (2007) provide an excellent overview of the different incentive systems offered in 13 OECD economies (including Australia) to encourage home ownership, with useful cross-country comparisons of the features of different housing markets in terms of the government schemes available. Examples include a range of affordable housing schemes in Ireland targeted at low-income groups, mortgage insurance and deposit assistance in New Zealand and schemes to promote home ownership for Indigenous people in New Zealand, Canada and the United States. While this provides a useful means of comparing the general background of schemes, no hard data are available for either Australia or for comparison with other jurisdictions. A few empirical studies of individual schemes to encourage home buyers exist: Martins and Villaneuva (2006) find that loan sizes and participation are affected by a change in the subsidised interest rate in Portugal, while Maki (2001) documents differences in consumer portfolios resulting from changes to mortgage tax deductibility provisions made in the United States in 1986. C

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The analysis proceeds in several parts. First, we describe the way in which the various grants and concessions have been converted to ratios for representative home buyers and mortgagees in each state. We then consider cash grants, the most important of which is the Commonwealth’s First Home Owners Grant (FHOG), which was introduced in 2000. Some states have supplemented this scheme over the past decade and these supplements are also discussed in this section. In addition to administering and providing grants, state and territory governments have applied a range of duties to housing transactions over the past two decades. The fourth section of the article discusses these schemes and provides a historical analysis and comparison of duty concessions available to FHBs relative to repeat buyers, as well as the net government assistance (grants and concessions) to this group. The fifth section draws out some implications of the data. 2. Data In this article, quarterly time series data for both government cash grants and duty concessions are expressed as a proportion of the mean FHB house price and the mean FHB mortgage in each state.4 In the absence of published data for FHB house prices, the series were constructed in the following way. We first spliced two shorter Australian Bureau of Statistics (ABS) capital-city house price indices to obtain a quarterly series for each state capital which spans the whole sample.5 Data from the irregularly conducted Survey on Income and Housing (SIH) by the ABS were used to provide self-reported valuations of houses purchased by FHBs. For each state, we generated a quarterly series for the price of FHB houses by rebasing the spliced ABS price index to the mean value of the SIH series at the mid-point of the sample (the 1999–2000 fiscal year). The result is an estimate of the quarterly value of the mean house price for a FHB in each of the capital cities. These six series are the basis for our comparisons of mean house prices throughout the article and are depicted in Figure 1; we use and refer to them as indicators of state prices.

2011 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research

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The Australian Economic Review

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Figure 1 First Home Buyer House Price Index 550

Index: base 1999–2000, $'000

500

Tasmania

New South Wales

Victoria

Western Australia

Queensland

South Australia

450 400 350 300 250 200 150 100 50 March 1991

March 1993

March 1995

March 1997

March March 1999 2001 Quarter

We present mean data so as to correspond with mean mortgage data available from the ABS. The states have levied taxes of two types in relation to the purchase and mortgage finance of owner-occupied housing. The first is stamp duty on the value of the dwelling and, in this article, the amount of duty payable is based on the mean FHB house price series described in the previous paragraph. The second tax is stamp duty on the mortgage instrument itself and, in this case, mean mortgage commitment data are taken from the ABS publication, Housing Finance (Cat. no. 5609.0). These data are shown in Figure 2. As our price and mortgage data are quarterly, the data series we construct are quarterly averages of monthly data. This does not always align with the introduction or abolition of government support schemes. Thus, we refer to schemes as beginning or ending in a particular quarter, where we have allocated the actual date of implementation to the quarter in which it occurred. The beginning of our sample period, third quarter 1991, is dictated by the beginning of the ABS’s Housing Finance series. Subsequently, mortgage duty has represented a small and declining proportion of the total duty payable, so for convenience, the sum of the two duties is expressed as a proportion of the FHB dwelling price. C

March 2003

March 2005

March 2007

March 2009

The construction of the total cash grants and duty concessions for each state has two components. The treatment of cash grants is straightforward: it is the value of the cash grants received by a FHB owner–occupier as a proportion of the mean FHB price. The value of duty concessions is calculated, from statespecific legislation, against the baseline of a repeat owner–occupier who purchases an existing dwelling and who takes a mean-value mortgage. 3. Grants To offset the introduction of the GST in 2000Q3, the Commonwealth Government negotiated with states and territories a package of grant assistance to FHBs, the FHOG, in the form of a cash grant. This scheme is administered by the state and territory governments and has had an important role in determining the eligibility of home buyers for other programs: eligibility for the FHOG scheme has become the entry criterion for other schemes. Two examples include the first home bonus scheme in Victoria, introduced in 2004Q2, and the first home owners duty concession rate in Western Australia (which also has an additional capital value criterion). The initial FHOG provided a cash grant of $7000 to FHBs for either new builds or


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$'000

Figure 2 Mean Loan Size of First Home Buyers 350

Tasmania

New South Wales

300

Victoria

Western Australia

250

Queensland

South Australia

200 150 100 50 0 June 1992

June 1994

June 1996

June 1998

existing home purchases, with the only qualifying criterion being that the purchaser had not previously participated in the Australian housing market. Between March and December 2001, the scheme was augmented for the first time by the Additional First Home Owners Scheme, with a further $7000 grant for new homes which was continued at the level of $3000 until the end of June 2002. The scheme then reverted to the original $7000 boost for all FHBs. In the third quarter of 2008, the bankruptcy of Lehman Brothers provoked a tightening in international credit conditions and consequent pressure on funds for Australian borrowers. It was anticipated that this would sharply affect the residential building market and so the Commonwealth Government increased the FHOG funds available to $14 000 for FHBs of an existing dwelling and to $21 000 for those building a new dwelling. This scheme lasted for 1 year and was reduced in the fourth quarter of 2009 to $10 500 for existing homes and $14 000 for new builds and finally returned to its original levels of a $7000 cash grant for either existing or new builds at the beginning of 2010. Figures 3 and 4 show the cash grants provided to FHBs of newly constructed houses and existing homes as a proportion of the mean C

June June 2000 2002 Quarter

June 2004

June 2006

June 2008

June 2010

house price. The impact of the Commonwealthfunded schemes in 2001–02 and 2008–09 is clearly evident in the two major humps in Figure 3. In addition to the nationwide amounts, a number of states has supplemented the FHOG with their own scheme; Figures 3 and 4 reflect the diversity of these arrangements. Victoria was the first state to supplement the Commonwealth-funded schemes. From 2004Q2 to 2005Q4, its First Home Bonus scheme provided an extra $5000 for either new home or existing home buyers, after which the grant was reduced to $3000 for buyers of existing homes until 2009Q2. From that point, it was gradually reduced to $2000 in 2010Q2 and eliminated for existing homes from 2010Q3. Buyers of new builds, however, received significant increases over and above the amounts available to buyers of existing homes. Until the final quarter of 2008, this amount was an additional $2000 but, in 2008Q4, the additional state-administered (but Commonwealthfunded) grant was increased to $11 000, giving a total grant of $32 000 in 2009Q3 at its maximum. The additional $11 000 remained in place until 2009Q4. Even more significant grants were available for new builds in rural Victoria, where from 2008Q2, the grant was $8000 in total (that is, $5000 more than the


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December 2011

Cash grants (% of median price)

Figure 3 First Home Buyer New Construction Grants 14

Tasmania

New South Wales

12

Victoria

Western Australia

10

Queensland

South Australia

8 6 4 2 0 2000

2001

2002

2003

2004

2005 Year

2006

2007

2008

2009

2010

2009

2010

Cash grants (% of mean price)

Figure 4 First Home Buyer Existing House Grants 7

Tasmania

New South Wales

6

Victoria

Western Australia

Queensland

South Australia

5 4 3 2 1 0 2000

2001

2002

2003

2004

additional state grant for the purchase of an existing home) and this rose to $15 500 from 2009Q3. New South Wales (NSW) and Queensland have also supplemented the FHOG. For example, NSW added an extra $3000 to the FHOG for all categories of first home purchases from 2008Q4 and, in 2009Q4, added a $10 000 grant for new builds, which compensated for the reduction in the national scheme at that time. From 2010Q1, the NSW scheme returned to $3000 above the national scheme for all FHBs. The data illustrate several important points. First, nationally mandated policies most likely C

2005 Year

2006

2007

2008

have had a differential impact across the states. As Figure 3 shows, the stimulus for new construction offered by the FHOG in 2008 represented 10 per cent of the average house price in Tasmania, more than twice the percentage in Western Australia. Second, the FHOG was, in 2008, targeted more closely at new home construction than it had been in 2000 (in South Australia, for instance, the grant ‘rate’ was 9 per cent for new houses in 2008, compared to 6.25 per cent in 2000). Third, in most states, the stimulus package in 2008 did little more than restore the real value of the FHOG for existing houses to its 2000 level. These features suggest that analysis of the effects of



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Figure 5 First Home Buyer Duty

Duty payable (% of mean price)

6 5

Tasmania

New South Wales

Victoria

Western Australia

Queensland

South Australia

4 3 2 1 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year

cash grants should be based on both spatial and temporal variations of the real value of the FHOG. 4. Concessions The majority of states has levied duties on home purchase transactions over the sample period from 1991Q3. The most important of these have been stamp duties on the value of the dwelling and on mortgages. In many instances, the governments have provided concessions for FHBs on these duties, which contribute to a reduction in cost of purchase for FHBs. The importance of these duties and the FHB concessions has changed dramatically over the sample period, particularly as the mortgage duties themselves have been progressively abolished. This section provides data on the alterations in the duties and the consequent impact on the net subsidy available to FHBs, calculated as a total of the grant schemes overviewed in Section 3 and the tax concessions in this section. Duty rates on mortgages are often levied as a dollar amount per $100 of value and are complex, with many different bands applying within each jurisdiction, different bands between jurisdictions and different times of changes in duty rates or bands across jurisdictions.6 Figure 5 presents the duty payable by FHB purchasers of a house costing the mean price in an urban area, with the mean mortgage. C

These data indicate significant interstate differences in duties. For example, South Australian first home purchasers paid very low rates of duty until June 2008, at which point the duty concession was abolished. A FHB grant was introduced by way of replacement for the concession, although for a household taking the mean-value mortgage and purchasing a meanvalue house, the grant of $4000 did not compensate for the duty payable of $10 445.86. Apart from South Australia, average duty rates for FHBs have fallen over time: in NSW, Queensland, Western Australia and Tasmania, rates have fallen from approximately 3 per cent to approximately 1 per cent. Note also that, for FHBs, discrete reductions have occurred on dates which are not synchronised with the major changes in federal grants. In NSW, for instance, stamp and mortgage duties for FHBs were abolished in 2004, while in Queensland, a significant reduction took place in 1998. The preceding discussion highlights that, if the objective is to evaluate the effect of taxand-transfer policy on the decisions of FHBs, it is necessary to take into account temporal and spatial variations in both the tax and transfers. If, as a first approximation, changes in duty concessions have equivalent effects to equalvalued changes in grants, a net tax rate can be used to summarise the data, and these are presented in Figures 6 and 7. In each case, the data


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December 2011

Net government assistance (% of mean price)

Figure 6 Net Assistance to First Home Buyers: New Homes

12

Tasmania

New South Wales

10

Victoria

Western Australia

Queensland

South Australia

8 6 4 2 0 –2 –4 –6

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year

Net government assistance (% of mean price)

Figure 7 Net Assistance to First Home Buyers: Existing Homes

8

Tasmania

New South Wales

6

Victoria

Western Australia

4

Queensland

South Australia

2 0 –2 –4 –6 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year

refer to net assistance from government by a FHB purchaser who buys a mean-value owneroccupied house in an urban area and who takes a mortgage of mean value. This assistance is expressed as a percentage of the mean first house price. As a proportion of mean price in each state, it is clear that prior to the introduction of the FHOG in 2000Q3, buyers in all jurisdictions were making net payments to their respective government on the purchase of a home. For both categories of purchasers, the net payments rate (just over 2 per cent of the mean price) was greatest in Victoria, while for FHBs of either C

established or newly built homes, net payments were lowest in South Australia. After the introduction of the federal FHOG scheme in 2000Q3, FHBs in the majority of states received net government assistance for most of the time, the exceptions being Western Australia and Victoria. Both NSW and Victoria had duties payable on housing transactions sufficient to offset FHOG scheme payments at its introduction and net assistance was almost increased to zero. The introduction of the statebased supplement in Victoria in the third quarter of 2004 and the abolition of mortgage duties in 2007Q3 in NSW and 2004Q3 in Victoria is


Dungey et al.: First Home Buyers’ Support Schemes in Australia Table 1 Abolition of Mortgage Duty for Owner–Occupiers Jurisdiction Tasmania Victoria South Australia New South Wales Queensland Western Australia

Reduction

Abolition

– – – – 20c per $100 from 2008Q1 –

2004Q3 2004Q3 2005Q3 2007Q4 2008Q3 2008Q3

also evident in the figures. There has been a trend among the states to phase out mortgage duties. In line with the trade-offs agreed between the Commonwealth and the states on the introduction of the GST, mortgage duties (which were typically around one-tenth of the value of stamp duty) were completely abolished in Queensland in 2008 and in Western Australia and South Australia in 2010. Table 1 gives the dates on which mortgage stamp duties were abolished for owner–occupiers in the different states. The increase in Commonwealth Government and state cash grants to FHBs in 2008 is evident in the steep rises in the net assistance rate to FHBs as a proportion of the mean price. The grant to FHBs of an existing home was much less generous than for new builds, which can be seen by comparing Figures 6 and 7. The highest rate of net assistance for both newly built and existing homes is found in Tasmania; while this is almost 5.5 per cent for existing homes, it is 8.8 per cent for new builds. The large cash boosts applied in NSW are sufficient to bring the net assistance to FHBs to 4.5 per cent for existing homes and 6.3 per cent for new builds, the second-highest degree of assistance in the country behind Tasmania. 5. Policy Implications This article presents data on grants and subsidies for first home ownership in different jurisdictions in Australia. In future work, these data could be used to extend previously published research in a number of directions, so as to inform policy choices. Importantly, the data could be used to quantify spatial and temporal effects of assistance to FHB purchasers C

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on demand for new housing. For example, data developed in this article could be used to investigate the hypothesis put forward by Berry, Dalton and Nelson (2010, pp. 80–1), who note that variations in FHOG grants may lead to cycles in house prices which expose FHBs to unexpected falls in prices and hence in housing equity as the degree of assistance is changed. Our data also suggest an extension to Leigh (2011), who explores tax incidence by using annual Australian postcode-level data on house prices, together with state-based statutory duty rates, to estimate the effect of stamp duties on house prices and market turnover. Because of the endogeneity between duty payable and house prices, he uses an instrumental variables approach to estimate the effect of changes in duty rates without the need to calculate time series for the rates themselves. The instrumental variable is the predicted stamp duty in a given postcode, assuming that property prices in the postcode followed the national trend. Leigh (2011) argues that, with fixed effects for postcodes and years, this procedure identifies exogenous changes in tax rates. Several features of the data presented in this article are relevant here. Leigh (2011) notes that stamp duty averages just 3 per cent of property values over his sample, which is consistent with our data for FHB duty rates shown in Figure 5: in the 1990s, when there were few FHB duty concessions, duty rates in most states are clustered around 3 per cent. The FHB concessions and grants became much more significant from 2000 onwards, particularly so since 2005, which is the end of the sample period in Leigh (2011). Figures 6 and 7 suggest that net rates of assistance for FHB buyers have, in some states and at some times, represented more than 8 per cent of mean property values and, as shown in Figure 8, FHB buyers represented as much as 30 per cent of market turnover. Conclusions based on predicted average stamp duty rates may be missing important features of government interventions on prices and turnover. A number of authors has analysed the effects of the FHOG on household decisions. For example, Wood, Watson and Flatau (2003) employ a microsimulation model which inter alia estimated that the price impact of the $7000


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Figure 8 First Home Buyers as a Percentage of All Dwelling Finance Commitments 32 30

%

28 26 24 22 20 18 16 14 12 10

New South Wales Victoria

8 July 1991

July 1993

July 1995

July 1997

July 1999

July 2001 Quarter

July 2003

July 2005

July 2007

July 2009

Source: Australian Bureau of Statistics, Housing Finance, Table 9b.

FHOG would be relatively small, increasing the number of households that prefer to own, rather than rent, by only 1.3 percentage points. However, when the grant was doubled to $14 000, the effect was 2.3 percentage points higher than baseline. The major contribution of the grant to increased home ownership was found to be in relaxing borrowing constraints and reducing the deposit gap, which was identified as the major constraint in housing affordability in Yates (2008). Wood, Watson and Flatau (2003) suggest that the effect of the subsidy was insufficient in general to bridge the deposit gap in the early parts of the scheme and hence was only effective in bringing forward purchase by households that would have eventually had access to the market once they had accumulated sufficient savings. Time series data of the kind provided in this article could be used to evaluate this hypothesis. It has also been suggested that the benefits are at least partly captured by the supply side of the market (see the discussion in Berry and Dalton 2004, Abelson and Joyeux 2007 and Sedgwick 2008). Abelson and Joyeux (2007) show that the effects of taxes on development are unlikely to be borne by home buyers, but by land owners. Abelson and Joyeux (2007) estimated that the FHOG grant subsidised home ownership to C

the tune of 1.6 per cent of the annual rental value of the housing stock, while stamp duties collected 9.6 per cent of the value, based on 2004 data. Clearly, these figures will have changed dramatically in the intervening period to the end of 2010. In that time, mortgage duties have been abolished (see Table 1) and subsidies have been increased in nominal terms, though not necessarily as a proportion of the value of the housing stock. Given that Abelson and Joyeux (2007) find that the net welfare gain of the subsidies to housing outweigh the deadweight loss and that Berry and Dalton (2004) find that reduced stamp duties are unlikely to affect housing prices, the impact of an increasing weight on grants and reduction in stamp duty can only be assessed in conjunction with the extent of the net subsidy and changes in the deposit gap. The data developed for this article will, for the first time, allow these issues to be addressed using the full spatial and time series variations in the actual fiscal measures relating to housing purchase. 6. Conclusion Data provided in this article illustrate the diversity of grants and concessions policies affecting housing choices by entrants to the Australian housing market. The data also show



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that variations in duty concessions are, at times, of the same order of magnitude as for grants. For both measures, there is considerable variation across jurisdictions and over time. Analysis directed towards assessing the effects of grant and concession policies should take these variations into account and this article is intended to provide a dataset appropriate for that task.

concessions to FHBs. The concessions are income-tested and, in 2000, were made contingent on the number of children (the upper income threshold with five children is shown in Table A2).

August 2011

1990–2002

Appendix 1: Grants and Rates of Duty and Concessions for the Australian Capital Territory and Northern Territory, 1990–2010 Australian Capital Territory The Australian Capital Territory (ACT) does not levy duty on mortgage contracts. No grant, other than the FHOG, has been provided. Duty has been levied on land transactions, with

Table A1 Transactions Duty, Australian Capital Territory (marginal rates, per $100 or part thereof) 2003–2010

Up to $14 000 Between $14 000 and $30 000 Between $30 000 and $60 000 Between $60 000 and $100 000 Between $100 000 and $300 000 Between $300 000 and $1 000 000 More than $1 000 000

$1.25

a

$1.50 $2.00 $2.50 $3.50 $4.50

Up to $100 000 Between $100 000 and $200 000 Between $200 000 and $300 000 Between $300 000 and $500 000 Between $500 000 and $1 000 000 More than $1 000 000

$2.00a $3.50 $4.00 $5.50 $5.75 $6.75

$5.50

Note: (a) $20 minimum.

Table A2 Home Buyer Concessions, Australian Capital Territory Existing dwellings Date 26/9/1989 22/8/1990 2/4/1991 13/1/1992 7/4/1992 31/5/1992 16/2/1993 31/1/1997 1/7/2000 1/7/2003 1/7/2004 1/1/2005 1/7/2005 1/1/2006 1/7/2006 1/1/2007 1/7/2007 1/1/2008 6/5/2008 1/7/2008 1/1/2009 1/7/2009 1/1/2010 1/7/2010

Value range ($’000s) 90.0–109.0 97.0–117.0 97.0–117.0 108.0–130.0 112.0–130.0 112.0–135.0 116.0–140.0 116.0–140.0 116.0–140.0 180.0–249.0 272.0–375.0 282.0–386.0 285.0–385.0 287.0–389.3 285.0–326.0 290.0–331.0 290.0–365.0 310.0–390.0 310.0–390.0 333.0–412.0 340.0–422.0 339.0–415.0 349.8–422.0 360.0–445.0

Rate per $100 12.26 13.05 13.05 13.93 13.93 14.09 14.23 14.23 14.23 10.81 13.36 13.75 14.18 14.10 26.66 27.30 17.40 18.05 18.05 19.80 19.75 20.95 22.45 20.55

Vacant land Value range ($’000s) 90.0–109.0 97.0–117.0 97.0–117.0 108.0–130.0 112.0–130.0 112.0–135.0 116.0–140.0 116.0–140.0 58.0–70.0 80.0–90.3 107.0–158.0 122.0–185.0 123.1–184.5 124.1–186.6 158.4–180.0 161.3–182.7 161.3–182.7 172.5–215.4 172.5–215.4 185.3–227.5 189.2–233.2 189.0–229.4 194.8–233.3 200.5–246.1

Rate per $100 12.26 13.05 13.05 13.03 13.93 14.09 14.23 14.23 10.54 14.30 7.90 7.90 8.07 8.05 22.22 22.85 22.85 22.85 14.25 14.25 15.50 16.50 17.75 16.10

Income thresholds Lower a

na 37 581.5 40 040.0 40 040.0 40 040.0 41 080.0 41 080.0 45 000.0 45 000.0 50 000.0 100 000.0 100 000.0 100 000.0 100 000.0 100 000.0 100 000.0 100 000.0 100 000.0 120 000.0 120 000.0 120 000.0 120 000.0 120 000.0 120 000.0

Upper na na na na na na na na 50 570 66 515 116 650 116 650 116 650 116 650 116 650 116 650 116 650 116 650 136 650 136 650 136 650 136 650 136 650 136 650

Note: (a) na denotes not applicable. C


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The Australian Economic Review Table A3 Stamp Duty, Northern Territory

Period 1990–1994

1994–2008 2008–2010

Dutiable value ($V) Up to 30 000 30 001–50 000 50 001–100 000 100 001–150 000 150 001–500 000 Over 500 000 Up to 525 000 Over 525 000 Up to 525 000 Over 525 000

Marginal rate (%) 1.6 2.1 2.7 3.2 4.3 5.4 0.065 · $V 2 + 21 · $V 0.054 · $V 0.06571441 · (0.001 · $V 2 ) + 0.0015 · $V 0.0495 · $V

Table A4 First Home Owner Duty Concessions, Northern Territory

Duty-free threshold 1/1/1997 to 19/8/2002 20/8/2002 to 2/5/2005 3/5/2005 to 19/6/2005 20/6/2005 to 30/4/2007 1/5/2007 to 5/5/2008 6/5/2008 to 3/5/2010 4/5/2010 to 31/12/2010

($V) 80 000 125 000 200 000

Principal place of residence maximum rebate 20/8/2002 to 19/6/2005 20/6/2005 to 3/5/2010 4/5/2010 to 31/12/2010

($) 1500

December 2011

duty was abolished in 1993. Table A3 details stamp duty rates; concessional rates are tabulated in Table A4. Endnotes 1. Lawson and Milligan (2007) give an overview of schemes to encourage home ownership in a number of Organisation for Economic Co-operation and Development (OECD) countries. 2. See ABS Census (2006), cited in Kryger (2009). 3. See, for example, Fane and Richardson (2005), Abelson and Joyeux (2007) and Brown et al. (2011). 4. Because of small sample sizes in some periods, the ABS datasets for the value of the average mortgage are incomplete for the two territories (the Australian Capital Territory and the Northern Territory). Series for these two jurisdictions have not been included in the charts in this article. For completeness, Appendix 1 details the grants and rates of duty and concessions from 1990 to 2010. 5. The two series are for established houses and are taken from House Price Indexes: Eight Capital Cities (ABS, Cat. no. 6416.0) Table 10, June quarter 1986 to June quarter 2005, and Table 1 from March 2002.

2500 3500

225 000 350 000

6. Data for the ACT and the Northern Territory, provided in Appendix 1, illustrate the complexity of schemes in the states and territories. Duty payable is generally expressed as a step function: in $100s of dutiable value, or part thereof. For simplicity, our duty calculations interpolated between the $100 steps resulting in (negligibly small) downward bias in duty payable.

385 000 540 000a

Note: (a) The First Home Owner Concession is not meanstested but the purchase price (including any goods and services tax (GST) payable) or unencumbered value of the home or land must not exceed $750 000 and $385 000, respectively. If building a home, there is no limit on the construction costs.

Northern Territory From 9 March 2001 to 31 December 2010, the ‘Quickstart’ program provided a one-off payment of $5000 for purchase or construction of a new home. The ‘Buildstart’ program ran from 27 October 2008 to 31 December 2009 and was directed to persons ineligible for the FHOG, providing a grant of $14 000 to persons purchasing or building a new house. The Northern Territory has never levied land tax. Mortgage C

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