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Stamp duty paused in NSW for first home buyers

Stamp duty paused in NSW for first home buyers

First home buyers rejoice. Stamp duty - one of the biggest upfront costs and barriers for would-be-buyers in New South Wales - has been temporarily axed for new homes up to $800,000.

Today’s announcement from Premier Gladys Berejikilian comes in an effort to boost housing construction in NSW, and support jobs in the building industry. The changes will apply from August 1st, 2020 and last for 12 months.

RateCity has crunched the numbers and found that for first home buyers, this change may shave over a year off the time it takes to save up a deposit.

What are the new stamp duty rules?

Previously, stamp duty exemptions applied to new homes for first home buyers up to the value of $650,000, with stamp duty concessions available for properties between $650,000 to $800,000.

Current stamp duty concessions

First home purchase priceOrdinary stamp dutySavings for first home buyers

of new dwellings*

Savings for first home buyers

of existing dwellings*

$650,000$24,740$26,857$26,857
$700,000$26,990$18,786$18,786
$710,000$27,440$17,172$17,172
$750,000$29,240$10,950$10,950
$775,000$30,365$6,922$6,922
$800,000$31,490$2,896$2,896

Source: NSW Government as of 2017. Notes: *Total of stamp duty exemptions plus first homeowners grant plus savings from LMI duty abolition (Genworth LMI Premium Estimator based on a first home buyer with a $50,000 deposit).

Now, stamp duty exemptions will carry up to the full $800,000 property price, with concessions available up to $1 million.

For vacant land, the stamp duty threshold will increase from $350,000 to $400,000, with concessions up to $500,000.

Also, the $10,000 first homeowners grant will still be available for those buying new properties worth $600,000 and under, or those buying land and building a new property up to $750,000.

Premier Gladys Berejikilian said the government expected “more than 6,000 first home buyers would benefit from the changes” potentially saving them thousands of dollars.

How much could this save first home buyers?

Before August 1, would-be buyers looking to get a property from $650,000 to $800,000 would have still had to pay some stamp duty costs, but they were reduced.

This meant that on an $800,000 property, first home buyers were still expected to save an additional $28,594 for stamp duty on both new and existing dwellings.

Now, these stamp duty exemptions mean for new dwelling purchases, first home buyers can not only potentially pocket that $28,594, but also shave significant time off of how long it takes to save a deposit.

Keeping in mind that these exemptions only apply for the 12 months following August 1, 2020. If borrowers were already close to saving a 20 per cent deposit, here is how much time is saved by not having to save up to pay stamp duty.

Time saved by not saving for stamp duty:

Median House PriceStamp duty concession costsNew stamp duty exemption costsTotal 20% deposit needed including stamp duty concessionsNew total 20% deposit needed including stamp duty exemptionTime taken to save based on weekly deposit of $400New time taken to save based on weekly deposit of $400Time saved with new stamp duty exemptions
$650,000$0$0$130,000$130,0005 years 11 months5 years 11 months/
$700,000$8,204$0$148,204$140,0006 years 9 months6 years 5 months4 months
$710,000$10,268$0$152,268$142,0006 years 11 months6 years 6 months5 months
$750,000$18,290$0$168,290$150,0007 years 7 months6 years 10 months9 months
$775,000$23,443$0$178,443$155,0008 years 1 month7 years 1 month1 year
$800,000$28,594$0$188,594$160,0008 years 6 months7 years 3 months1 year 3 months

Source: RateCity.com.au, NSW Government website, NSW State Revenue Stamp Duty Calculator.

Notes: Savings based on deposit of $400 per week into savings account paying 1.50 per cent per annum

Home loan rates for first home buyers

For some borrowers who choose to still save a larger total deposit size by factoring in stamp duty to their savings, this may help them to nab a more competitive interest rate from lenders.

Home loan lenders typically reward borrowers with small LVRs (loan-to-value ratio) with more competitive interest rates, as having a larger chunk of the property’s price paid off upfront presents you as a more reliable borrower.

While no low rates are ever guaranteed, it’s always worth considering making your home loan application look more desirable by saving a larger deposit, if financially possible.

Here are some of the most competitive home loan rates available to first home buyers:

Variable, owner-occupier home loans paying principal and interest

Home loanAdvertised rateComparison rate
Freedom Lend Freedom Variable Home Loan

2.17%

2.17%

Reduce Home Loans Super Saver

2.19%

2.19%

Mortgage House Essentials Low Rate Home Loan

2.34%

2.52%

Source: RateCity.com.au. Data accurate as at 27.07.2020.

Fixed, owner-occupier home loans paying principal and interest

Home loanAdvertised rateComparison rate
Homestar Finance Star Essentials Fixed Home Loan 2 years

2.06%

2.38%

HSBC Premier Fixed Rate Home Loan

2.09%

3.10%

Greater Bank Great Rate Fixed Home Loan

2.09%

3.53%

Source: RateCity.com.au. Data accurate as at 27.07.2020.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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