A key state government support for first-home buyers has shrunk by 25 per cent in the past three years due to caps that make stamp duty concessions increasingly irrelevant for most buyers.
The retreat of first-home buyers from the market - despite Premier Gladys Berejiklian insisting housing affordability is her highest priority - was underlined by Bureau of Statistics figures released on Friday showing the number of homes purchased by first-home buyers in NSW falling to its lowest level since the early 1990s.
The government provides concessions on stamp duty for new properties under $650,000. But because so few properties in Sydney are built below that price, the number of people benefiting from these concessions has started to drop by about 10 per cent a year.
Since July, there have been just over 5300 exemptions granted from stamp duty for first-home buyers. In the same period the previous year, just over 6000 exemptions were granted, according to figures from the Office of State Revenue. Since 2014, the value of stamp duty concessions has dropped by 25 per cent.
Separate figures released by the Bureau of Statistics on Friday quantify the scale of the challenge for first-home buyers. Across the state, 1029 first-home buyers purchased properties in January - the lowest monthly figure since January 1992.
Penelope Collaros, a 25-year-old social worker, was ineligible for a concession on her two-bedroom off-the-plan Lidcombe apartment which she bought for $655,000 in 2014.
"How can they have the stamp duty exemption limit set at what it is, when it's quite unrealistic to purchase a property under that price in Sydney?" said Ms Collaros.
The government has not changed caps on stamp duty exemptions for first-home buyers since it limited the scheme to new properties in 2012. First-home owners buying new properties worth less than $550,000 avoid stamp duty, and those buying new properties up to $650,000 pay a reduced rate.
"The government needs to look at what one and two-bedroom apartments are going for on average these days and lift the cut-off amount to that, so more people can actually buy something that qualifies," said Ms Collaros, who has paid about $25,000 in stamp duty on her apartment in Frasers Property Australia's Botanica development which settles in May.
"I lost hope [when trying to buy]," she said. "I originally wanted to spend about $500,000 but it was really difficult to find a property in that price range, so I went for a property with a long settlement."
The executive director of the Housing Industry Association, NSW, David Bare, said the caps on stamp duty exemptions should be lifted to $750,000.
"They just don't make sense," Mr Bare said of the current caps.
"What our members tell us, and they are producing 85 per cent of this product, is that it's the stamp duty that really rocks them," he said.
The other state policy used to support first-home buyers is a grant scheme, under which eligible home owners can receive a grant up to $10,000 for new properties purchased below $750,000. But the use of this scheme has also fallen this year.
Chris Martin, a research fellow at the City Futures Research Centre at the University of NSW, said stamp duty should be replaced by land taxes, but stamp duty breaks were not a solution to the problem of unaffordable housing.
"The evidence is that where stamp duties are removed the prices that vendors receive tend to go up," said Mr Martin. He nominated removing taxes that encourage speculative investment in housing as critical for making housing more affordable.
When Ms Berejiklian became premier, she nominated housing affordability as the biggest focus for her government. Her Housing Minister, Anthony Roberts, has indicated stamp duty changes could be part of a new package of policies, but those policies have not been released.
In emailed comments through a spokeswoman, Ms Berejiklian said: "The NSW government is considering a wide range of policy proposals to address housing affordability.
"We are looking at everything - nothing is off the table," she said.
The story 'I lost hope': the break that's not working for young homebuyers first appeared on The Sydney Morning Herald.