This transcript was generated automatically and may contain small errors.
This is a Momentum Media production. Yeah, now we aren't huge fans of talking economists in property data because they have absolute horrible track records on that. And that's another conversation. But in terms of interest rates, indicators, core metrics of inflation, they do a lot of deep dive into that space. And even some of our white papers at InvestorKit, we talked about potential for A cuts in 2023 or early 24 and the cycle of interest rates hitting to a pause and or, you know, just ending.
But that may be a couple of increases away, in my opinion, just because there is still that data that's remaining stubborn and high based on what the RBA wants to see. So that's it from a finance side. Let's go over to policy. There's some interesting policy that's come out. Lee, what is happening in New South Wales, especially with first time buyers?
Well, today it just got released. And essentially what has been released is the first home buyer choice initiative in New South Wales. So essentially, the first home buyer choice initiative is going to lower the upfront costs for home purchases for first home buyers who choose to opt in. So from today, being the 16th of Jan, when we're recording this, eligible first home buyers in New South Wales wanting to purchase a property up to $1. 5 million or land, which they intend to build for up to $800,000, will be able to choose between one of the two following.
So one is paying transfer duty, previously known as stamp duty, or an annual property tax under a new government scheme called the first home buyer choice. So first home buyer choice essentially has been designed to make home ownership more attainable and faster. New option to pay an annual property tax instead of transfer duty lowers the upfront costs, obviously, for purchasing a property. So instead of around, what, 4. 5% of the purchase price, it was roughly as an upfront cost that you have to pay in addition to your 5% or 10% or so percent deposit.
Essentially, there's a calculator, you can annualize it. And it's estimated to cut two years off the time needed to save a deposit, which is massive for first home buyers who are trying to get on the ladder. So existing transfer duty exemptions or in concessions for first home buyers in New South Wales will continue to apply for eligible purchases up to $800,000. So it is massive. And I'm going to go through a couple of examples of how that might actually look in a real life example when you are a first home buyer.
Yeah, it's massive, right? That is huge. I mean, this can save people up to $60,000 in upfront costs when you're hitting the peak of that $1. 5 million in purchase price. This is no small amount.
This is generational policy shifts. And the reason why we have policy as a core subject of Property Nerds episode like this is that finance, policy, and property, these three trends, massive drivers of it. Policy is a huge driver. We are going to see so much activity in the first home buyer take up of this. I think it's going to be huge.
So all those affordable sub $1. 5 million will see a lot of demand. It's important to recognize that schemes like this are actually demand driving schemes. Why is that important to know? It means that you want to get your act together and work as hard as you can to make it happen for you in use of the scheme.
Because demand driven policies fade very quickly. And I'll give you an example. Firstly, you're going to see a whole cash into the system, a whole amount of cash. A lot of lending to properties is going to be able to happen without people having to have two to three years, potentially even four or five years of savings. They're going to be able to bring that purchasing timeline forward.
So this means the buyers of today are going to be combined with the buyers of next year, the year after, and potentially even the year after that to all be able to transact over this next 12 months. Now, yes, they're not in the best of conditions of borrowing capacity, but whoever can fit that mark is going to see a lot of activity. This then means your savings of 50 to 60K will start to translate into higher purchase prices. And that higher purchase price with more demand will start to have that saving sit in a higher purchase price. For example, a house that might be 800K today is boosted by a lot of buyers.
Now, if they're saving, say, $30,000 in stamp duty, that $30,000, what if that house moves from 800 to 900 to a million? And as it goes on, you've not saved 30,000 because in a shorter period of time due to the influx of demand, you're paying that same amount just for a million dollar home now, but it was once 800. So it does mean that these are demand driven schemes. They are amazing for this first subset of homeowners that are going to go into there and get the opportunity to get a first home. But as the years progress, the demand will soak up a lot of the savings and whatever that 800K property is, it's going to be a million bucks.
And whatever that 30 or 40K savings is, you're not going to save it. It's just going to be in a price of a million bucks, but it'll be perceived savings because that million dollar home could have been 40 grand of stamp duty, but now it's not 40 grand of stamp duty. You're saving on that. So yes, amazing. But if you don't get involved quick in these sorts of stuff, you're just going to pay it back in the price increases caused by demand based schemes like this.
So great for those who are going to get involved. Yeah. So I think it's really good that they've obviously allowed it up to 1. 5 mil purchase price because a lot of the current first home buyer concessions, you're cut off at that 800K mark in New South Wales. And look, that's very, very difficult.
You might have all the dots lined up from a finance point of view, but finding that property is quite difficult. So that's one really, really good thing there. So it's right up to equal to 1. 5 mil. So a couple of things is obviously you or your partner that you're buying with needs to be an Australian citizen or permanent resident.
You or your spouse cannot have previously owned or co-owned residential property in Australia nor received first home buyer grant or duty concessions before. Now you must move into the property within 12 months of the purchase and live in it continuously for at least six months. And obviously you must have signed the contract of sale for purchase after the 11th of November, 2022. So it's very similar to the first home buyer's grant that you have that requirement to live in that property for at least six months. And I mean, I guess...
We're going to see a lot of funny business here. I'm telling you right now. Circumstances change, obviously, and people might invest those property, turn those properties into investments. Yeah, look, I mean, we're not advocating anything. We're not here saying that you should.
I'm just telling you that it's going to happen. That's all. It's going to happen. We're going to see a whole bunch of quote unquote first home buyers that were rent investors waiting for something like this to happen. And they're going to get a crap load of savings by getting a first home with this benefit.
And their circumstances may change. And that will mean they may not live in this for as long as they thought. And this will turn to an investment property. And as a result, their funds are further replenished to go and buy that next property. So whatever it does, though, the main thing is it has even circumstances changing, quote circumstances.
There's going to be some benefit. And the benefit is less Australians relying on pensions, more long term revenue for the government, transaction volumes still for subsequent buyers on stamp duty. And if it turns into an investment, we're going to see a lot of rental properties come into the market. Rental vacancies are super low. Now, the main thing is people shouldn't do it just based on its investment potential to save money.
You still have to look at future investment potential of a location just because it is still only New South Wales and there may or may not be the right locations that are the closest to you. So growth will always outweigh savings on some transaction. But massive news, huge result, first home buyers, massive, massive win for you. However, this is not going to be a win for the first home buyers three, four years later. I can tell you right now, it's important to get into this stuff.
Data has proven that home buyer schemes are demand drivers. Their affordability wins for that segment of buyers that get in, but then they become demand drivers, which means prices grow. So that money will get soaked up very quickly, but it's important to go out there, get involved because this is huge savings and will offer many people stability, the home that they've wanted, the roof over their head, an opportunity to get into the market, grow wealth for long term and so forth. So big news there on the property side. Now, from a perspective of policy, that was really the main one we wanted to cover.
And going into property trends, I wanted to start off by sharing the results for 2022. So CoreLogic track national dwelling value changes. And it's important to recognize, we talk about this all the time, national dwelling values don't really make any meaningful difference to any property investor buying a property because you end up buying a property in a street, in a suburb, in an area, in a city, then in a state, then in the country. So the national volume is so many data sets away from you.
