increasing the grant but restricting it to new and substantially renovated properties.

Previously first home buyers would receive a $7000 grant for the purchase of any property in the territory.

Treasurer Andrew Barr said the large drop in grants issued had been expected and was part of an overall plan to slowly phase down first home grants, along with stamp duty.

The change, which came into effect in September 2013, increased the grant to $12,500 but buyers could no longer use it to buy established properties.

At the time the government said the move was to help new home buyers and assist the residential construction industry.

The number of grants paid in the ACT plummeted from September 2013, dropping into double digits for the first time in the past decade. In April, just 68 grants were issued to Canberrans compared with 273 in the previous year.

In total, only 1860 first home owner grants were issued in the 2013/14 financial year, the lowest number in 10 years.

Minister Barr said help for first home buyers would instead come via stamp duty cuts.

"Stamp duty relief rather than grants is a better policy approach because it encourages supply and boosts affordability," he said.

Most other jurisdictions, including NSW, had already targeted their grants at new home buyers only, with the aim of giving a "shot in the arm" to the local construction sector.

"[Also] boosting the demand for new homes will encourage builders to offer more homes on the market, thereby helping making homes more affordable," he said.

Real Estate Institute of the ACT president Michael Kumm said he had seen some people abandon plans to buy a house due to the new regulations.

"We've had people come and look at properties that are 12 months old and because they don't qualify for the first home owner grant they bow out of it," he said.

"So I think they would be well advised to back out of it."

Mr Kumm said otherfactors could be contributing to the drop in new grants, including budget cuts.

But he said prices in the ACT were cheaper than they'd ever been and relaxing regulations around the grants would help Canberra's housing market.

"I think if they could [broaden it] to say properties under five years old that would be good, that would certainly open it up to more buyers," he said.

HIA ACT and Southern NSW executive director Neil Evans said while he was concerned about the drop in first home owner grants, strong competition from across the border and a lack of cheap land in the ACT were primarily to blame rather than the policy.

"We've been asking the ACT government and they've been saying they want to have land finished and ready to build on [but] we haven't seen that yet. I know they're working hard towards that but they can't work hard enough because we want more shovel-ready affordable land," he said.

"I think based on existing data in other jurisdictions this [tighter] policy does work."

Domain Group senior economist Andrew Wilson said recent Australian Bureau of Statistics data indicated first home buyers were starting to re-enter the market.

There were 100 loan approvals for June, the highest since September last year, when the grant changed.

He said the disparity between the number of grants and the number of loans would continue given first home buyers still demanded established properties.

"Notwithstanding the low levels of grants we're still seeing first home buyer numbers rise in Canberra and I think that will continue," Dr Wilson said.

He said it was typical for grant levels to fall following changes to first home owner grant schemes.

"When there is a sunset clause and people are encouraged to take advantage before the changes occur then you always see that bringing forward of demand," Dr Wilson said.

"Then the usual scenario is after the party comes the hangover and it takes a while to regenerate the activity levels."