The state government expects to save over $1 million after it placed a cap on the value of homes for the first home owners grant which will leave 2 per cent of buyers ineligible for an assistance package.
A cap of $750,000 will come into effect after the federal government's first home owners grant falls back from up to $21,000 to $7,000, which is due to expire on July 1 this year.
Mr Buswell said the aim of the cap was to better target housing assistance to first home buyers in greater need.
"It is hard to argue with the proposition that any home buyer who can afford to pay or finance more than $750,000 for a property, be it their first purchase or not, is unlikely to need assistance from the taxpayer," he said.
"The new intergovernmental agreement on Federal financial relations expressly provides States with the ability to set a cap. Queensland and New South Wales have done so and Western Australia will be applying a ceiling too."
The intergovernmental agreement stipulates a cap should not be less than 1.4 times the state's capital city median house price, estimated in WA to be $418,000 in the December quarter 2008.
Queensland and NSW have announced caps of $1 million and $750,000 respectively.
Mr Buswell said the WA cap would result in only about 2 per cent of first home buyers becoming ineligible for the grant, with estimated savings to the state of about $1million to $1.25million a year.
"This is not so much about conserving government money but more to ensuring assistance is appropriate and equitable and does not amount to a handout just for the sake of it," he said.