The Victorian Government have announced major changes, intended to increase affordability for First Home Buyers in Victoria. From 1 July 2017:
- stamp duty (land transfer duty) will be abolished for first-home buyers purchasing a new home of <$600,000 (replacing the 50% duty reduction).
- stamp duty will be phased-in (ie sliding scale of duty) for eligible first-home buyers purchasing a home (new or established) of $600,001 to $750,000
Further, the First Home Owner Grant (FHOG)
- will be increased from $10,000 to $20,000, for new homes built in regional Victoria that are valued up to $750,000 (for contracts signed from 1 July 2017 to 30 June 2020).
- will continue to be offered to eligible first-home buyers of new homes in metropolitan Melbourne at $10,000.
The off-the-plan stamp duty concession
- will continue to be available to purchasers buying a property they will occupy themselves (ie their PPR - principal place of residence)
- will no longer be available to other purchasers eg investor purchasers.
Also, the Government will pilot a new, shared co-ownership scheme, which is open to couples earning $95,000 a year, or $75,000 for singles. The Government will purchase up to 400 homes, taking a 25 per cent share in the properties. The idea will mean homeowners will need a smaller deposit and can enter the market sooner. For more details, see the State Revenue Office website.
In my opinion...
These changes will provide a significant stimulant and assistance for first time buyers to get into the market, in particular the removal of stamp duty concessions for investors buying Off The Plan.
BUT, I also think property prices might well increase by the savings that the first time buyers are otherwise making through these initiatives. My clients will probably still want to borrow the same amount (given the focus has to still be on ability to repay) but are now able to bid $6k-$20k higher given the removal of these costs...thus, pushing prices up!
Perhaps the longer term solution would be for the Government to address the under supply of property, particularly in the Melbourne market. They have also announced EXTRA land to help create 17 new Melbourne suburbs over the next two years in a bid to tackle housing affordability. This is a positive step but this will obviously take time to flow through.
What should you do?
If you're in the market for your first home, or wondering how you might assist your children buy their first home, please contact me. You could also check the basic afforability and other calculators on my website here. These won't reflect the above announced changes for Victoria until they are implemented (1 Jul 17).
Cheers, Marvin Ph 0431 376 008