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Stamp Duty Changes for First Home Buyers

By Coposit
11/23/2022

The New South Wales Government has passed a new legislation which allows first home buyers to choose between paying stamp duty or an annual land tax in the state. This initiative primarily helps to lower barriers for young people as they endeavour to access the property market.

What does this new change mean?

First home buyers are no longer required to pay stamp duty, up to a purchase price of 1.5 million. To be exempted from this, purchasers instead have to pay an annual property tax. But the latter is far less financially draining than the stamp duty. The upfront stamp duty was about 4.4%, so based on the assumption that the growth of a property is 2.5% per annum, it is estimated to take 14 years for a property purchaser to be paying as much stamp duty as they would for annual property tax.

Who is it available for?

It is only available for first home buyers. This makes it a big win, since there are limitations on having a deposit ready to go. Usually, once you’re already on the property ladder, the property under your name is growing and you can accrue equity savings. However, before you’re at that stage, it’s quite challenging for everyday Australians to save up for a deposit, especially if you are paying rent or have multiple mouths to feed. So, the stamp duty exemption is a huge advantage worthwhile leveraging.

Fun Fact: The average age of a first home buyer in NSW is 39 years old.

Most people at 39, have some serious commitments, so saving for a deposit at that point is incredibly difficult. Effectively, the minimum amount of deposit now needed is halved because originally, they needed a 5% deposit plus four and a half percent stamp duty, making it approximately 10%. Now property purchasers just need the 5% deposit.

How can you apply?

Although the legislation will officially come into practice in January 2023, you can get a refund on the stamp duty if you choose to exchange today. That is a significant barrier removed, now making it easier than ever before for first home buyers to take the leap and buy a property.

Most clients are usually able to afford the repayments, the rent that you’re currently paying is equal to or more than what it would cost to own a property that you’d be willing to buy. But the goalpost to owning a home, keeps shifting further and further away as people don’t have the 10% deposit. Now that 10% has become 5%, people can finally make that transition.

What is going to happen with the house prices?

Around the first home buyer market segment, which is also in the investor space, any property out of the one and a half million-dollar price range will remain quite competitive. In case you are anticipating some big discounting like the media portrays because in NSW specifically there’s a major supply issue, then you’re mistaken.

Supply is only going to get worse because approvals are decreasing, and local councils and state government make it increasingly difficult for developers to get projects out of the ground. That’s a big plus point for purchasers as it’s not easy to get approval for building as there are strict guidelines which need to be met beforehand, meaning you get the best quality. Unfortunately, on the other end of the coin, it slows down the supply chain, so supply in NSW just never meets demand.

A benefit of purchasing a unit is that the developers utilise all the land value. So, it gets spread across more and more units. Thus, the land tax amount is evenly spread across more people.

Hot Tip: Some unit owners pay a significant amount of land tax purely because the apartment block has an opportunity to be developed. As a purchaser, you can also get stung if you buy a property on today’s land tax, but the area is underdeveloped and the zoning changes and all of a sudden, you go up a few floors, the land tax will also go up.

The government legislation to exempt stamp duty for first home buyers, is a great barrier break down for people looking to step into the property market, seize the chance now.

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