Abolishing stamp duty for first home buyers is the most significant of the housing affordability changes announced by the Victorian State Government. The reforms will see first home buyers not paying stamp duty on purchases of new or existing properties worth up to $600,000.
With Canstar’s stamp duty calculator estimating that a Victorian first home-buyer would pay $17,145 in stamp duty on a property worth $600,000, removing the tax for first home-buyers is a significant change.
Victorian Treasurer Tim Pallas says the changes represent promised action on the government’s part.
“We promised we would tackle housing affordability and that’s exactly what we are doing,” he said.
“Many people aren’t looking for mansions; they’re just looking for that first step on the ladder so they can get a home, a roof over their head, so that they can plan for their family’s future.”
Victorian Premier Daniel Andrews described the removal of stamp duty as “a really simple, common sense way in which we can support more young couples into the housing market.”
Stamp duty is a tax paid on written documents and several types of transactions including motor vehicle registration, insurance policies, and transfers of property (including real estate). This tax operates at the State and Territory level, meaning that home-buyers in different parts of the country will pay varying amounts of stamp duty on similarly priced property transactions. The other thing that varies is whether the tax is charged at a flat rate or an ad valorem rate; this depends on the circumstances and the total value of the transaction.
What’s being said about the reform?
Reaction to the stamp duty changes has been mixed, with the reform receiving praise from first home buyers but concern from others about the potential effect on house prices.
— The Today Show (@TheTodayShow) March 5, 2017
Federal Treasurer Scott Morrison praised the Victorian Government for the changes, saying “good on them for having a good crack at this”, but he voiced concerns that simply removing stamp duty would drive actual house prices higher.
He also emphasised the importance of housing supply in the fight for affordable housing, saying, “You’ve got to get more houses built.”
Prime Minister Malcolm Turnbull echoed this sentiment, saying that “tax and stamp duty and other issues are relevant, but the biggest issue is supply”.
— 9Finance (@9Finance) March 6, 2017
What other measures are being brought in?
Some of the other changes being proposed by the Andrews Government to help first home buyers include:
- Discounted stamp duty on property purchases between $600,000 and $750,000 on a sliding scale, for both new and established homes.
- A 1% tax levied on vacant residential properties in Melbourne’s inner and middle suburbs, with exemptions made for holiday houses, deceased estates, and overseas owners.
- A new co-ownership plan tentatively titled the “HomesVic” program, where the government retains a partial ownership right over a property.
- A shared-equity scheme aimed at low to medium-income families, which will see at least 10% of all properties in government-led urban renewal programs set aside for first home buyers.
- Doubling the First Home Owner Grant to $20,000 for those buying newly-built properties worth up to $750,000 in regional Victoria.
The HomesVic program will see the Government purchase up to 400 homes and make these available for purchase by individuals or couples, but retain a 25% share in ownership in these properties. This means that those interested will only need to pay for 75% of the property’s value, which will in turn require a smaller deposit and make it easier for young Australians to enter the property market. To be eligible for the scheme, applicants can’t earn over $95,000/year for couples or $75,000/year for singles.
Scott Morrison commended the Victorian Government for the plan, and described the program as “very interesting”. However, he signalled a preference for the program’s required capital to come from the private sector rather than Government coffers.
The governments of Australia’s other states and territories have yet to weigh in on the changes, but it’s expected that housing affordability will soon receive more attention on the federal stage, with the issue expected to be a key focus of the May 9 Federal Budget.
— Sky News Australia (@SkyNewsAust) March 4, 2017