Stamp Duty: What First Home Buyers Need to Know
The Berejiklian government announced in July 2020 that it planned to remove stamp duty on homes purchased up to $800,000 as a result of COVID-19. Now in the 2020 NSW Budget, Treasurer Dominic Perrottet has announced plans to phase out stamp duty on all properties purchased in NSW. These changes to stamp duty have large impacts for first home buyers, due to its impact on a buyer’s finances and market conditions. Vision Property and Finance will break down stamp duty and the impact of its changes on first home buyers.
Stamp Duty: First Home Buyer Changes
Stamp duty is a tax placed on the purchase of properties within Australian states, including NSW. The level of stamp duty placed on property changes based on factors such as the location, size and cost of the property. However, stamp duty is generally 3-4% of a property’s value. What the NSW government is proposing is giving buyers the option to pay an annual land tax instead of a large upfront stamp duty payment. This will allow buyers to choose to spread the upfront cost of stamp duty over the period of occupancy of the property.
Impact on First Home Buyer Finances
With NSW properties, stamp duty costs $34,000 on average. This is a significant upfront payment, especially alongside paying a deposit, lenders mortgage insurance and other hidden costs. This can turn away first home buyers from purchasing a home for years. The option to remove this significant upfront payment will make homeownership much more accessible in both competitive and non-competitive areas. It also means that homeowners can put down more of a deposit on their loan, leading to less lender’s mortgage insurance payments, and a greater chance that a first home buyer mortgage application will be accepted.
Impact on the Market
Reducing the financial burden of an upfront stamp duty payment with new property purchases will help stimulate movement around the housing market. This means that people who are already on the property ladder will be more inclined to upgrade and move into a larger property instead of renovating. This will free up the supply of smaller first homes and reduce prices for first home buyers. It will also add incentive to parents whose children have moved out of home to downsize to a smaller property. These will free up properties long-held onto by those who feel as if the costs of transitioning between homes have been too great to justify moving.
Vision Property and Finance wants first home buyers to take advantage of all the stamp duty benefits that are available to them. Alongside the Berejiklian Government’s removal of stamp duty on properties up to $800,000, there is a range of first home buying schemes that prospective buyers can use to receive $55,000+ in cash benefits.
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