Stamp duty is undeniably a huge financial barrier when it comes to homeownership.
After years of back-and-forth discussion, the NSW government has proposed stamp duty reform aimed at helping Australians reach their dream of owning their own home. Moreover, the proposed stamp duty overhaul is set to provide a boost to the local economy by galvanising fluidity in the property market.
- What the proposed stamp duty reform looks like
As much as we’d love to say the notorious tax is being abolished altogether, The NSW government is rather looking to give home buyers the option to pay stamp duty as a smaller, annual property tax rather than one upfront lump sum.
A consultation paper released by the government in November last year suggests the annual property tax would include a fixed rate of $500 plus a percentage of the unimproved land value – a calculation not dissimilar to the likes of council rates. While it doesn’t negate the cost altogether, the proposed annual property tax would allow those struggling to enter the property market a more achievable pathway to home ownership.
While some home buyers may prefer to pay the one-off tax, the reform ultimately provides the option to pay a smaller amount of money over a longer period of time thereby removing some of the burdens of upfront costs.
- How it will stimulate the market
The proposed stamp duty reform is aimed at stimulating the NSW property market and ultimately making it more efficient. The idea is that people will be more willing to move as they will no longer need to factor in the lump sum cost of stamp duty when purchasing a new home.
People weighing up the pros and cons of renovating, for example, may decide it is easier and more cost-effective to move. Meanwhile, renters who have a dream of owning their own home will find entering the market more financially attainable.
- How it will affect house prices
The proposed stamp duty reform essentially reduces the initial transaction costs involved with buying a home. This means that more buyers, who may have otherwise struggled to save both a deposit and the money for stamp duty, will be able to enter the property market. More buyers with more funds ultimately leads to increased demand which would inevitably put upward pressure on already soaring house prices across the state.
The other side to this coin, however, is that in the medium to long term, the reform could lead to house prices levelling out. The thinking behind this is that abolishing an expensive upfront cost, which is often a barrier to moving will incentivise people to move. If more downsizers, for example, sell rather than holding on to property for the sake of avoiding the tax, the housing stock across the state will eventually be more evenly distributed.
- What it means for first home buyers
Currently, in NSW, first home buyers are eligible for a stamp duty exemption on properties under $650,000. Under the proposal, stamp duty concessions are set to be replaced with a grant of up to $25,000 which can be put towards the new property.
The stamp duty reform will help young residents, who may have previously been locked out of the housing market, get a foot on the property ladder. Ready to invest?
