The first home buyers who had to pay back their government grants

By Alex Brooks

“Property is not what people think it is,” warns Katrina Yaghoub, whose first home purchase in Plumpton back in 2003 turned into a financial nightmare potentially costing more than $100,000.

Katrina and her husband John Dejesus are among hundreds of first home buyers that have been asked to hand back their first home owners’ grant and stamp duty exemptions for not living in their first home, as required.

“We planned to move into the apartment when we bought it but my brother got a brain tumour and there was no way I could get to the hospital every day living in Plumpton,” she says.

The family rented out the apartment and is now required to pay back $32,000 in penalties and grants, but is appealing the decision based on compassionate grounds that their circumstances changed due to family illness.

The family was forced to sell the $432,000 apartment in 2006 for just $360,000 after the developers’ promise that Plumpton would boom when the M7 freeway was completed failed to materialise.

Investigations by the NSW Office of State Revenue revealed 595 people rorted the first home grant and stamp duty exemptions last financial year – and were forced to collectively pay back more than $5 million in grants and penalties.

In one case, an Auburn man was sentenced to weekend jail for fraudulently obtaining first home benefits.

Two property managers from Parramatta have also been prosecuted for fraudulently obtaining first home benefits, with one given a 15-month suspended sentence and 150 hours of community service, after she pleaded guilty to charges under the Oaths Act and the Crimes Act in relation to fraudulently receiving the First Home Owner Grant.

The other property manager was sentenced to a two-year good behaviour bond and 50 hours of community service for deliberately providing false documents to the OSR to claim the First Home Plus duties concession.

Official figures show that last financial year the Office of State Revenue investigated 1905 suspect First Home Owner Grant applications and 572 stamp duty concessions worth $6.8 million during the period when 60,000 first home buyers received benefits.

In the 2007-2008 year, 1829 first home grants were investigated and 400 people paid back $3.5 million while the 2006-2007 year saw 368 investigated with seven prosecuted and some resulting in gaol terms.

The numbers of first home buyers has skyrocketed since the Federal Government boosted the first home owners grant by an extra $7000 and $14,000 for new properties from October 2008.

More than $892 million of taxpayers’ money has been pumped into the NSW property market in first home grants and stamp duty exemptions in the first six months of 2009.

The extra boost to the $7000 first home grant is due to be wound back from September 30 and expire all together from December 31, but that hasn’t stopped Sydney house prices from skyrocketing during 2009.

Residex founder John Edwards, who collates property data and forecasts, says Sydney house values grew by a rapid 6.85 per cent to $593,000 by the end of July 2009 – an annual growth rate of almost 28 per cent.

“The government has overstimulated the market and I’m close to saying it looks like a housing bubble,” Edwards says.

“The extension of the first home owner boost (beyond June 30) grant was wrong – it ought to be terminated immediately for existing dwellings and only apply to brand new properties and for a longer period of time.”

A Housing Industry Association home affordability report shows Australians’ ability to buy a home slipped by 5 per cent in the quarter to June thanks to rapidly rising house prices.

HIA chief economist Harley Dale says he “agrees with John Edwards’ sentiment” but predicts that unemployment and rising interest rates will prevent any house price boom continuing.

“Just two months ago people were saying house prices would fall through the floor and now we are seeing rapid price rises,” he says.

Professor of Public Ethics at Charles Sturt University Clive Hamilton says first home grants have been “good generational politics” to allay younger people’s fears of never being able to afford a home.

“The economics of first home grants were always dodgy,” he says.

“When the value of all homes is going up, all it does is widen the gap between those who own and those who don’t – rising house prices are only of benefit if you want to move into a cheaper house and cash the difference.”

GRANTS AT A GLANCE

*First home buyers are able to claim a $14,000 grant for an established home, plus stamp duty exemptions for properties under $500,000 until September 30. This winds back to a $10,500 boost from October to December 31.

* New home buyers receive greater incentives of up to $21,000 as new home building creates more employment but this is due to wind back from December 31.

• More than $540 million in first home buyer grants paid out to 37,093 people in the first six months of 2009, along with $352 million in stamp duty savings to first home buyers for the first half of 2009

• In the past six months alone, more than $892 million in grants and stamp duty cuts have helped more than 37,000 first home buyers in NSW.

• Since the introduction of first home buyer grants in July 2000, almost 410,000 first home buyers have received grants and stamp duty exemptions worth just under $6 billion.

The Office of State Revenue does a compliance audit on every first home grant to check with electoral rolls, the RTA utilities that applicants have changed their address to meet the residency requirements.

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© 2007 Alex May