Stamp duty will be discounted for people purchasing a property in Victoria for a limited time, the government has announced, among a suite of measures intended to get people spending, buying and building.
The announcement comes after New South Wales revealed a plan to transition home buyers away from stamp duty and towards an annualised property tax.
State Treasurer Tim Pallas said the tax break will help stimulate Victoria’s economy after enduring one of the longest lockdowns in the world.
“We will encourage Victorians back into the property market, by waiving (25) to 50 per cent of stamp duty on eligible homes, for the remainder of the financial year,” he said, in an address Tuesday evening.
“And Victorians will be able to get into the property market sooner and with lower deposits, thanks to our $500 million Victorian Homebuyer Fund.”
Properties must cost less than $1 million
There’s good news and conditions for buyers looking to snap up a home in Victoria.
Budding home buyers will get some relief, but the size of the discount will depend on the residential property’s age and the savings will dry up in about six months.
A waiver of 25 per cent will be available on existing properties, while 50 per cent will be discounted on new properties.
The properties must have a transaction value of $1 million or less.
And the tax relief will only be available for contracts entered on on 30 November to 30 June, 2021.
Nonetheless, the discounts were generally welcomed by the industry.
Fixed - 2 years
Fixed - 1 year
Fixed - 3 years
“The Victorian Government understands the need to kick-start the state economy, as people emerge from lockdown with pent-up demand and enforced savings by not travelling or going out,” James Symond said, chief executive of Aussie Home Loans, the largest brokerage firm in the country.
“The stamp duty relief offers first home buyers in Victoria a fighting chance at getting into the market sooner than they would otherwise and could have an immediate and positive impact on first home buyers and young families.”
Tax relief, but not tax reform
Victoria’s discount will offer short term relief, but without reform before the next financial year, property buyers will have to overcome the hurdle of saving enough money to cover the sticker price on stamp duty once again.
This differs from the reforms announced by NSW one week ago, where residential buyers will have the choice to switch over to a property tax, a yearly fee of $500 plus a tax of 0.3 per cent of the home’s value.
However, a RateCity analysis found the NSW tax would be cheaper in the short run, but more costly after about a decade.
The typical (median) apartment in Sydney is valued at $735,350, according to CoreLogic November data. Stamp duty would cost $28,428, or homebuyers could pay $2706.05 in property tax each year.
But the cost of property tax would exceed the outlay of stamp duty after 10 years.
The typical house in Sydney is valued at $993,927. Stamp duty would cost $40,065, or homebuyers could pay $3481.78 each year on property tax.
After about 11 years, the cost of property tax would be more than stamp duty.
Eventually some buyers won’t have the choice but to pay property tax in NSW. Properties switched over to an annual property tax would stay that way even after they are sold.
Other relief measures
The discount to stamp duty was among a range of measures introduced to help stimulate the Victorian economy.
Treasurer Pallas also announced the Victorian HomeBuyer Fund, a $500 million scheme that’ll make it possible for first time home buyers to secure a mortgage with a 5 per cent deposit.
First time buyers won’t have to pay lender’s mortgage insurance (LMI) -- a fee that can cost thousands-of-dollars -- for applying for a mortgage with a deposit less than 20 per cent, but in exchange, the Victorian government would secure a proportionate equity interest in the property.
Another measure is intended to create more options for renters by lifting the supply of housing. Under the Big Housing Build, a 50 per cent land tax discount and an exemption from the Absentee Owner Surcharge are being offered to new developments until 2040,
The final stimulus is an extension of the government’s first home owner grant. Budding buyers entering the market could receive a $20,000 grant for buying or building a new home in regional Victoria until 30 June, 2021.