"I can't buy anything for $600,000," she said. "Everything [was] more likely to be around the $700,000-mark. It's very frustrating."

Early this year, she got some extra money from her parents and arranged a larger bank loan. But Ms Lev still found the market running faster than she could keep up.

"I've been looking for the last three or four months on $725,000," Ms Lev said. "I keep missing out, even for that amount."

She's not alone. Stamp duty cuts for first home buyers made by the Victorian and NSW governments in July last year are now coming back to harm the very home buyers those state's political leaders said they were designed to help.

Victorian Treasurer Tim Pallas said the tax reforms had worked. "The real story here is that our reforms are saving first home buyers thousands of dollars and helping them break into the housing market." Penny Stephens

The stamp duty change, which eliminated the transaction tax on homes worth up to $600,000 and cut it on prices up to $750,000 was a disaster for Ms Lev, said her buyers agent Julie DeBondt-Barker.

"It made it worse," Ms DeBondt-Barker said. "She's always chasing it."

Australia's east-coast dominated housing market is slowing and prices are falling overall in the two largest cities. NAB, the fourth-biggest residential lender on Friday predicted a national fall of 0.8 per cent in house prices, reversing its earlier expectation of 0.7 per cent gain.


But in Melbourne, while prices have flattened in blue-chip areas, the picture was very different in more affordable suburbs, Ms DeBondt-Barker said.

"If you go to Epping, Werribee, Tarneit, Cranbourne – Frankston's gone nuts – if you go to the outer suburbs, the only ones first home buyers can get into now, it's absolutely soaring and is still going up," she said.

The policy does assist some buyers in the first instance by cutting the stamp duty bill they have to pay on their purchase. On a home with a price tag of $650,000, for example, stamp duty is cut from $34,070 to $11,356, giving the buyer more money to spend up front. For a property costing $600,000 the $31,070 bill they would otherwise pay is eliminated. But that – along with other policies such as first home buyer grants – simply means the first group of buyers have more money to throw at vendors, pushing the overall market higher for subsequent waves of buyers.

This widely predicted outcome is not a surprise. But the full extent of those decisions is now clear. New ANZ data show just what these policies have done to buyers such as Ms Lev, who delayed buying her first home to build up a business.

Since July 1, properties in the lowest-priced quartile of Melbourne's housing market have jumped 9 per cent, compared with a gain of just under 3 per cent for Melbourne market as a whole.

"Since the stamp duty savings came in, the lowest 25 per cent has grown more than three times faster than the overall market," said ANZ senior economist Daniel Gradwell. "That's a pretty significant turnaround."

In Sydney, where higher prices have mean the stamp duty thresholds affected a smaller number of properties, the effect was similar. While the greater Sydney market has fallen 3.2 per cent since July 1, dwellings in the lowest-priced quartile have held their ground.

CoreLogic figures for February show that Melbourne houses in the lowest quartile were those with a value up to $620,343, while for apartments the figure was $432,994. In Sydney, houses in the lowest-priced 25 per cent were those priced up to $773,708. For units, the cut-off was $614,363.


Ms DeBondt-Barker, a principal of Buyers Home Base, says political leaders of the two largest states were just playing politics and not genuinely trying to help first-time buyers.

"It was a political move, if anything," she said. "Anybody in the field thought 'That's ridiculous, it's never going to work'. It was obviously going to go this way."

Victorian Treasurer Tim Pallas said the tax reforms had worked.

"The real story here is that our reforms are saving first home buyers thousands of dollars and helping them break into the housing market, with almost double the amount of first home buyers accessing a stamp duty exemption or concession than for the corresponding period in the previous year," he said.

He also said the tax cuts were part of a range of measures – including increasing supply – that would bring prices down.

Ms Lev said it was crucial to be able to live close to her Noomi bean bag and cushion business but said the rising prices were pushing her further and further away.

"The further I move, the harder it is for me," she said. "I want to invest my time into growing my business rather than driving. I'd rather live close to work."