FIRST homebuyers could be allowed to pay off their stamp duty over several years in a HECS-like scheme to reinvigorate the property market.

The pay-as-you-go plan is one of several proposed by the Real Estate Institute of NSW and being considered by the state government.

Purchasers would be able to pay off their tax burden over three years but the government would be "protected", with stamp duty guaranteed against the property in the same way as unpaid land tax.

The REINSW also called on the government to slash red tape and apply stamp duty concession on homes purchased by residents over 65, to make it easier for the elderly to downsize their homes.

Since the removal of bonus grants, the stamp duty exemption for purchases under $500,000 and the discount for purchases between $500,000 and $600,000, first-time buyers now only have the benefit of the original $7000 federally-supplied First Home Owners Grant when buying a pre-existing property.

State treasurer Mike Baird said the government kept the stamp duty exemption for newly built property purchases as an incentive for the building sector.

However, he said a pay-as-you-go stamp duty scheme for first-time buyers was "an interesting idea" that was being considered.

"I can specifically tell you that is under active consideration," he said.

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The state's housing shortage is the worst in the country according to the Housing Industry Association, which estimated in September 2011 that by 2020 it would face a shortfall of 155,700 dwellings.

The Population And Residential Building Hotspots report released last week showed no NSW suburb in the national top 20 of fastest-growing metropolitan and regional areas.

"Housing supply and affordability are the key issues facing NSW and need to be tackled head-on in the upcoming state budget," REINSW president Christian Payne said.

"Convoluted planning controls are delaying the delivery of new housing stock, which is urgently needed to meet the growing demand of thousands of people flocking to live in Sydney."

He said that, as a result, housing affordability was being squeezed. "Add to the already high price of real estate in Sydney the significant additional burden of stamp duty, and you have a market which is pushing the Australian dream beyond the reach of many," he said.

John Symond of Aussie Home Loans said while the proposed scheme looks good on paper, young buyers need to do their sums.

"I think you've got to be careful. Young, inexperienced buyers can easily get over their heads," he said.

"Australians have traditionally been better borrowers than savers. If first home buyers have the possibility to repay it in time then great, but I wouldn't like to see it impede young people ... by just deferring the inevitable."

Mr Baird said dropping or cutting stamp duty was not a solution to the affordability crisis that the government's focus was on providing more dwellings - rather than offering incentives.

Originally published as Pay as you go to help stamp duty