Potential home buyers punished for doing the 'right thing'
SHOULD I go to university or buy a house?
That's the distressing question the next generation of homebuyers may have to face.
It's hard enough to save the deposit for a home in many Australian cities thanks to the Molotov Cocktail of skyrocketing house prices, low interest rates, minimal government help and dizzying demand. But there's another hidden hurdle: your HECS-HELP debt.
A record number of Australians are now going to university and with the cost of a degree ranging from $6000 to $10,000 a year, a university student can graduate with a debt of more than $30,000, all before entering the fulltime workforce. That equates to about the cost of stamp duty on a median priced home in some capital cities, making it even harder to save up the cash for a deposit.
This is a quandary Newcastle resident Adrian Henry, 33, has found himself pondering. Was going to university really worth the opportunity cost of missing out on home ownership earlier?
After graduating from university in 2009 after completing two degrees - a Bachelor of Business and a Bachelor of Podiatry - in the hopes of starting his own podiatry clinic, he was left with a $40,000 HECS-HELP debt which he only just finished repaying eight years later.
But now finally being debt-free, he is struggling to save up the stash of cash needed to afford the deposit on a home after house prices have exploded over the past decade - even though he does now own his own small business, Newcastle Podiatry Services.
The median house price in Newcastle, a coastal city about 160km north of Sydney, is currently $925,000, according to realestate.com.au, and the median unit price is $555,000.
"The market is running away," Mr Henry told news.com.au.
"I've got a number of friends who dropped out of high school and started working and were able to purchase a home in the late 2000s - when prices were lower and they were able to receive the first homeowners grant and a complete stamp duty exemption on their property purchases. Some of these people now have two properties to their name.
"This one particular friend was able to buy his unit for $220,000 back in 2009 and his compulsory repayments are now about $240 a week. But he is able to double his repayments to be able to pay off the property in the next few years."
First homeowner schemes have been scaled back quite a bit in New South Wales, despite rising house prices across the state.
Previously, new buyers were eligible for a full exemption on stamp duty on homes valued up to $500,000, or concessions for homes valued between $500,000 and $600,000, regardless of whether the home was new or existing.
This was replaced in 2012 with the First Home - New Home scheme, which gives first home buyers an exemption on new homes only valued up to $550,000, or a concession for new homes valued between $550,000 and $650,000.
Similarly, the first homeowner grant was restricted to new homes under the same scheme.
"I just feel I've done the right thing by putting myself through university, getting myself educated, and repaying approximately $40,000 in HECS over the past several years. I feel like I've done the right thing but I feel like the government has sort of punished me somewhat," Mr Henry told news.com.au.
"Suddenly, I'm getting to the stage where I am looking to buy a property and there is no assistance from the government, house prices are much higher, and stamp duty rates haven't been adjusted."
Mr Henry argued that even if he did want to buy new to access the governmental assistance, securing an off-the-plan apartment under the $550,000 cap is becoming a difficult feat in the burgeoning Newcastle market.
"There are risks involved in buying off-the-plan and I might point out too that in Newcastle, a lot of off-the-plan buildings are being sold within the first few months of being advertised by negatively geared investors and investors from Sydney who've had significant equity growth."
He is now pleading with the NSW Premier, Gladys Berejiklian, to address the real issue facing struggling first time buyers like himself.
"I'm not normally one to speak out about these sorts of things but I sent an email to Gladys Berejiklian last year and explained my situation and her answer was, stubbornly, to say [the solution is] to increase the supply of housing.
"I really think first homeowners should receive a complete stamp duty exemption on their first purchase, regardless of the type of purchase. Why does NSW, considering it's performing so strong financially, why do they continue to ignore the plight of first home buyers?"
Mr Henry is currently renting a two-bedroom apartment in Cooks Hill for $430 a week and believes he is still only half way towards achieving that home deposit, despite the fact he has been steadily saving since graduating university eight years ago.
"I directly ask Premier Berejiklian to address this situation."