Stamping out the old
The latest change in stamp duty concessions is steering first home buyers away from existing homes and toward new builds. The NSW government amendment enacted last month will take effect in January and will severely reduce the number of eligible applicants for the tax cut.
Today all first-home buyers are exempt from stamp duties for properties under $500,000 in value and receive concessions on a sliding scale for those priced up to $600,000. A home priced at $550,000 has a full rate of $20,260. But with the concession this is reduced to $11,245.
A spokesperson at the Office of State Revenue (OSR) said first-home buyers of new homes under $600,000 must apply for stamp duty concessions within three months of the purchase date. They will receive a 25 per cent discount as long as construction has begun and the property has never been occupied or sold. In the case of a $550,000 home, the buyer will pay more stamp duty – $15,195 instead of $11,245 – under the new rules. The concession includes off-the-plan purchases.
Chief executive officer at Urban Taskforce Australia Adrian Gadiel said these tax breaks have caused home prices to spike. “When you give a large group of home buyers stamp duty concessions on established homes, what tends to happen is too few people are chasing too many homes.” The concessions inflate buyers’ original budgets for real estate, he said. “When [buyers] are armed with government concessions they will use those concessions to bid against each other and drive the price up.”
“The way to avoid that problem is to tightly target the concessions and target them in a way that deals with the underlying problem, the housing under-supply.”
He said the new legislation is welcomed by developers. “I think developers will want to ensure they meet the needs of first home buyers in this price range. The challenge is whether or not they will get the planning approvals.”
“The environment that we have in Sydney is one where the housing supply is severely constrained by planning laws,” he said.
Eastern suburbs real estate director at McGrath Coogee, Adrian Bo said the new rules could be a response to low residential stock. “There really is a lack of stock especially with new housing, we’re really faced with a housing shortage today because around 2008 when the GFC hit banks tightened their lending and made it difficult for developers to get loans,” he said. “The lack of new construction could be the reason why the government feels they need to further incentivise developers.” The agent said some people really need these incentives. “I’ve even witnessed real life scenarios where couples and professionals have said that they couldn’t afford to buy without the first-home buyers’ grant and stamp duty concession.”
By Deborah Erwin
