The housing affordability crisis in Australia has hit an all-time high forcing state governments to act. In Victoria, the Andrews government is focusing on helping struggling first-home buyers by abolishing the much-hated tax: stamp duty.
With Melbourne’s average house price at a record high of $795,447, this stamp duty relief is welcome news to those looking to secure a piece of real estate.
What is stamp duty?
Stamp duty is a tax purchasers need to pay when they buy a property. It doesn’t matter if they are Luxury homes in Melbourne or cheap homes in Melbourne, they all come with stamp duty! However, the more expensive the property, the higher the tax.
Each state calculates their stamp duty differently with some higher than others. In Victoria, currently first home buys receive a 50 percent discount on the stamp duty tax. Regardless of the fee, this must be paid within 30 days of the property’s settlement.
With such a booming property market in Victoria, the government receives $5.7 billion annually from stamp duty! The revenue collected from the stamp duty tax is reinvested into the state and territory’s economy by the government. It typically goes towards the cost of transport, infrastructure, police, emergency services and the public health sector.
How the stamp duty exemption can help you
From July 2017, Victorian first home buyers are exempt from paying stamp duty on those properties costing less than $600,000. There will also be discounts for first home buyers buying properties between $600,000 and $750,000. This is regardless of whether the properties purchased are off-the-plan, newly built or established homes. It also includes apartments, townhouses or stand-alone homes.
The Andrews government hope this stamp duty relief will help first home buyers get their foot in the door of the property market. It’s estimated 25,000 people per year will benefit from the tax exemption saving an average of $8,000.
With this new incentive, the biggest winners will be those who buy homes for approximately $650,000. Currently, they’d have to find $34,000 in fees in addition to the deposit. However, from July, this will fall to about $11,000.
Without the concern of having to budget for stamp duty task, first home buyers are able to spend a little more on property or save the money to invest elsewhere. New home owners could use that money to help repay the mortgage, furnish the house or pay for associated costs such as a conveyancer, removalists or service connections.
More savings can be made on new homes
With inner Melbourne property prices achieving all-time high prices, many first-home buyers are finding it too difficult to enter the market, even with the stamp duty exception. The appeal of looking for property outside of Melbourne not only offers cheaper house prices and a lifestyle change, it also offers additional savings.
First home buyers looking for property in regional Victoria are perhaps the biggest winners of the recent government changes. From 1 July 2017, the First Home Owner Grant (FHOG) will double for those purchasing new homes built in regional Victoria.
The government will be offer a $20,000 grant for those regional properties valued up to $750,000. Some of the more popular areas are expected to be not only land and house packages in Melbourne, but Geelong, Ballart and Gippsland. Combine the FHOG with the stamp duty relief and you might consider this a great time to buy!