The Real Estate Institute of Western Australia has criticised the decision by the West Australian state government to axe the First Home Owners Grant for established homes in its budget, but welcomed the retention of their stamp duty exemption.

REIWA president David Airey said being exempt from stamp duty for homes under $430,000 is a huge benefit to all first time buyers. “It’s a real cost saving and I’m pleased this threshold has not been lowered,” he said.

The $10,000 grant for first home buyers who build a new home will remain in place. “This decision is pushing many first home buyers to the urban fringes, contrary to the government’s own urban infill policy. By aiming the FHOG to new constructions only, first home buyers who want more affordable, established homes in older suburbs are being disadvantaged. This creates an imbalance in the housing market and adds to urban sprawl,” Airey said.

The government’s argument that the FHOG policy was geared towards providing more housing was flawed, because Perth was currently oversupplied with dwellings. “Supply is not the issue in WA, affordability is the issue and making it harder for first home buyers attracted to existing stock makes no sense,” he said. According to the Office of State Revenue the median purchase price of established homes across WA for first home buyers in April was almost $440,000.

This budget was the third consecutive budget increase in land tax. “It’s dreadful that the government is increasing land tax by lifting tax rates and adjusting thresholds. This move will generate $826m for the government over the next four years. This tax, especially for commercial properties, will be passed on to tenants through increased costs across the board,” he said.

Airey said the huge hike in land tax was another illustration of the State Government’s heavy reliance on property taxes to fill treasury coffers. “Once again I call on the government to have a mature, long overdue discussion with businesses and the wider community with regard to completely reforming the property tax system. In particular, we need to abolish stamp duty and, over time, replace it with a modest land tax across all owners, as recommend by the Henry Tax Review,” Airey said.