Who wants more affordable housing? First-home buyers! When do we want it? Now!
Well, if you’re hoping to purchase your first home in VIC soon you may just be in luck. The Victorian government have recently revealed new housing affordability measures which clearly favour first-home buyers, while foreign and domestic investors are hit with tighter legislation.
Let’s take a look at exactly what is included in the new measures.
Stamp duty for first-home buyers
As of 1 July 2017, the state property tax will be scrapped for any first-home buyer in Victoria whose property costs less than $600,000. There will also be incentives for properties worth between $600,000 and $750,000 — whether they are new or existing.
Premier Daniel Andrews explains that it will help those who “feel like they are being locked out of the housing market” and will help them to get their foot in the door. “It means they can put extra money towards what matters most — buying their first home” Mr Andrews said.
The government is expecting around 25,000 people per year to benefit from these new tax cuts, and predicts that first-home buyers will save an extra $8000 on average.
However, those that will benefit the most from the latest concessions will be people who buy for about $650,000, whom would currently have to pay $34,000 in fees. From July, this will fall to about $11,000. At the moment, Victorians who purchase their first home for under $600,000 get a 50% stamp duty discount after changes that were made by the former Coalition government.
A $10,000 first-home owner grant is also available for anyone who buys a freshly constructed property in Melbourne for under $600,000. The good news is that now the government is set to double the bonus for those buying in regional Victoria. So with all of these property tax cuts considered, the biggest overall winners will be people in the country who buy a newly built home for about $650,000, they will be set to save almost $33,000.
If you’ve had your eye on a brand spanking new home, eligible first-home buyers of new homes in metropolitan Melbourne will still continue to receive the $10,000 First Home Owners Grant.
As part of many changes designed to make housing more affordable, the Government will also introduce a new tax levied at 1 per cent on vacant residential property to target empty properties in Melbourne’s inner and middle suburbs. Owners will be encouraged to make their vacant properties eligible for purchase or rent. However, there will be exemptions if it is a deceased estate, a holiday house or if the owner is overseas.
“This will send a really strong message to people that if you are effectively banking an empty property and denying that to the market and contributing to the lack of supply, then there’s something you can do about it,” Premier Daniel Andrews said. “You can simply pay the tax or you might go see a real estate agent.”
This sector is being hit with extra taxes from all sides. The Foreign Investor Surcharge Duty is doubling from 4% to 8%. At the same time, foreign buyers will face an increased annual land tax surcharge – up from 0.75% to 2% a year.
Stamp duty concessions for investors are being scrapped under the new measures. Previously, investors purchasing off-the-plan could defer payment of stamp duty by 12 months, meaning they didn’t have to pay the tax until 15 months after settlement. From 1 July, the concession will only be available to owner-occupiers of off-the-plan properties. Investors will have to pay stamp duty within three months of exchanging.
“The new stamp duty relief for first-home buyers is expected to have a significant impact on the affordable end of the VIC property market. As new buyers enter the market, existing owners will, in turn, upgrade, with a broad flow-on effect,” said Ironfish National Apartments Manager, William Mitchell.
Ms Berejiklian said the housing affordability package was aimed at encouraging thousands of new first-home buyers to make a purchase over the next four years.
“This will provide a once-in-a-generation opportunity for first-home buyers to get their foot in the market,” she said.
Housing demand boost
Subsequently, until the 1st of July when these changes come into effect, we are likely to see many buyers waiting to enter the market so that they can take advantage of the first-home buyer grants on properties valued at under $650k. However, due to the sudden increase in demand, this is likely to increase property prices arguably putting these properties out of reach for first-home buyers, so only time will tell whether or not these measures are effective on housing affordability.
If the property market leaves you feeling more confused than a chameleon in a bag of skittles, talk to us – we’re your very ‘unordinary’ finance people.
For more information on these changes go to: http://www.sro.vic.gov.au/news/changes-first-home-owner-grant-and-stamp-duty