Stamp Duty Boost for first home buyers in Melbourne

Will the impending changes to the first home owners grant and stamp duty help level the playing field for first home buyers?

July , 2017, is the magic date for first home buyers in Melbourne and Sydney who are looking to take advantage of a raft of new incentives and stamp duty relief designed to ease housing affordability.

The State Governments in Victoria and New South Wales have both acknowledged that first home buyers are facing major hurdles in attempting to enter the property market because of rising prices, higher deposits required by banks, and competition from foreign and local investors.

The new measures focus on supporting them with targeted grants and concessions designed to ‘help level the playing field’.

Stamp Duty Changes

Both the Victorian and NSW Governments will abolish stamp duty for first home buyers on existing and new homes. In Victoria, this will apply for houses up to $600,000, while in NSW it is for homes priced up to $650,000.

In addition, NSW will introduce stamp duty discounts for properties worth up to $800,000, while there will also be cuts in Victoria for properties up to $750,000.

In announcing the changes, NSW Premier Gladys Berejiklian said that first home buyers could save up to $34,000 under the new measures, which were designed to give first home buyers a competitive edge when bidding against investors.

Other stamp duty changes in NSW include:

  • Abolishing the stamp duty charged on lenders’ mortgage insurance, which is often required by banks to lend to first homebuyers with limited deposits
  • Local investors purchasing off-the-plan properties will no longer be able to access stamp duty concessions.

For a Victorian first home owner, the stamp duty relief represents significant savings – buying an established home worth $600,000 will mean they no longer have to pay the  $15,535 stamp duty that currently applies. For a $450,000 home, it’s a saving of $9485 in stamp duty fees.

Buyer’s Advocate, Bradley Willmott from Cohen Handler’s Victorian office has over 20 years’ experience in the Melbourne real estate market and said that he has found that many first home buyers were waiting to buy until after July 1 to take advantage of the stamp duty changes.

According to Bradley, first home buyers who were willing to consider an apartment over a house could still buy great property that was relatively close to the Melbourne CBD. He cited the example of a 1970’s-built, two-bedroom, one-bathroom renovated apartment in Flemington that he recently bought at auction for $450,000.

“The property had the benefits of being close to great cafes, local shops, public transport and was located in a well-regarded street of period homes. A similar property went for $500,000 around the corner an hour later. So there are definitely some good apartment buys close to the city,” Bradley said.

First Home Owner Grant

The Victorian Government has announced that it intends to increase the First Home Owner Grant (FHOG) from $10,000 to $20,000 for new homes built in regional Victoria and valued up to $750,000. This will apply for contracts signed from 1 July 2017 to 30 June 2020. Eligible first-home buyers of new homes in metropolitan Melbourne will continue to receive the $10,000 FHOG.

According to The Courier, Treasurer Tim Pallas said he expected the new grant would assist up to 6000 Victorian first home buyers and increase buyer interest in regional cities like Ballarat and promote decentralisation by drawing young people out of the state’s congested capital.

In NSW, a first homeowners’ grant of $10,000 is available to builders of new properties worth up to $750,000, and to buyers of new properties worth up to $600,000.

Foreign Investors

The crackdown on foreign investors is part of a wider package aimed at boosting housing affordability across Australia. This year’s budget has already seen a “Ghost tax” of up to $5000 for foreign buyers who leave their property unoccupied or not genuinely available on the rental market for at least six months per year. In addition, foreign property owners will have to pay capital gains tax on their principal residence when sold.

The foreign investor stamp duty surcharge in New South Wales will double from 4 per cent from 8 per cent. The surcharge is in addition to normal New South Wales stamp duty, which can be as high as 7 percent for the most expensive properties.

Additionally, the annual land tax on foreign homeowners will rise to 2 per cent from 0.75 per cent. Stamp duty concessions for investors purchasing off-the-plan properties, popular with foreign buyers, will be abolished.

The Victorian Government has also announced it intends to introduce a vacant residential property tax (VRPT) from January 1 2018, which would be 1 per cent of the capital improved value (CIV) of taxable land .The vacant residential land tax (commonly referred to as the vacant residential property tax or vacancy tax) is a tax on residential properties in the inner and middle suburbs of Melbourne which are unoccupied for more than six months a year.

Tips for First Home Buyers

Bradley said that those looking to enter the property market could benefit greatly from the expert advice of a buyer’s advocate who can assist with auction bidding, private sale negotiation and due diligence on recommended properties.

He also has the following tips for first home buyers:

  • It’s important to be realistic about what you will be able to afford. You may not be able to buy a modern two-bedroom, 2-bathroom apartment with a car space in South Yarra for $500,000, but there many great opportunities available if you reconsider your budget, suburb or wishlist of features.
  • You definitely need to have finance approved and deposit ready so that you will be ahead of the competition when the right opportunity arises.
  • Be extremely cautious when buying off-the-plan (OTP) apartments and make sure you get some expert advice. It can often be the case that the expected capital growth doesn’t eventuate or the value may be less than the purchase price.

“There will always be a couple of apartments that will outperform the others in the building, either due to views that can’t be built out, or floor size/orientation. We are able to find and recommend those apartments to our buyers who want an off-the-plan product where they want to pay a deposit now and save the balance whilst the project is under construction,” Bradley said.

If you are a first home buyer interested in buying after July 1 to take advantage of the stamp duty changes, contact us now so that we can begin the search to find the best property for you at the right price.


up icon