Transaction costs, deposit requirements and first-home ownership

Wood, G, Watson, R, Flatau, P and Ong, R 2006, 'Transaction costs, deposit requirements and first-home ownership', Economic Papers, vol. 25, no. 3, pp. 252-271.


Document type: Journal Article
Collection: Journal Articles

Title Transaction costs, deposit requirements and first-home ownership
Author(s) Wood, G
Watson, R
Flatau, P
Ong, R
Year 2006
Journal name Economic Papers
Volume number 25
Issue number 3
Start page 252
End page 271
Total pages 20
Publisher The Economic Society of Australia
Abstract The transition into homeownership is becoming increasingly difficult for first-home buyers. In this paper we measure the deposit requirements and the transaction costs associated with purchasing a home for the first time, and whether a reduction in stamp duty obligations will help potential first-home owners' bridge the gap between their savings and the up-front cash requirements that must be met on purchase. We conclude that those with low-to-moderate permanent earnings have particularly large gaps between savings and up-front cash requirements. A key finding is that stamp duties typically account for 23 per cent of total up-front cash requirements, and their formal incidence among potential homebuyers is highly regressive. If all potential homeowners were granted exemption from stamp duties, we estimate that cash requirement gaps are immediately bridged for only 9% of those who cannot currently meet up-front cash requirements from savings.
Subject Public Policy
Urban and Regional Economics
Keyword(s) personal business and other non business
taxes and subsidies
state and local taxation
subsidies and revenue
housing demand
housing supply and markets.
Copyright notice © 2006. THE ECONOMIC SOCIETY OF AUSTRALIA.
ISSN 0812-0439
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