First home buyers in New South Wales can expect big stamp duty savings through reforms which were delivered in the 2017 budget and commenced on 1 July 2017. The new package is anticipated to assist many potential purchasers by improving housing affordability across the state.
How can first home buyers benefit?
Entering the property market may now be more attainable for many first home buyers.
The First Home Buyers Assistance Scheme provides concessions and exemptions from stamp duty for eligible purchasers.
Stamp duty has been abolished on all homes (new and existing) with a purchase price of up to $650,000 for eligible first home buyers. This represents a considerable savings of $24,740 on a $650,000 property.
Concessions are also available on homes priced between $650,000 and $800,000 for eligible buyers. The concessions will be calculated on a sliding scale and gradually decreased as the property value nears $800,000.
No duty is payable on vacant land to the value of $350,000 to be used to build a first home with concessions available for land valued between $350,000 and $450,000.
The First Home Owners Grant (New Homes) provides eligible first home buyers with a one-off grant of $10,000 if building a new home to the value of $750,000, or if purchasing a new property to the value of $600,000.
Am I eligible?
Eligible applicants for the First Home Owners Grant (New Homes) are required to abide the following criteria:
- You entered into the Contract on or after 1 July 2017;
- You (or another eligible purchaser) occupy the property for a continuous period of 6 months of which is within the first 12 months of settlement;
- You are a natural person, meaning that you are not purchasing through a company or trust;
- You are at least 18 years of age;
- You or your spouse or de facto partner have not previously received the benefit of a concession or exemption under a First Home Buyers Scheme;
- You or your spouse or de facto partner have not previously owned residential property in Australia unless the property was held solely as an executor or trustee;
- Either you or your spouse or de facto partner are an Australian citizen or permanent resident at the time of entering into the contract; and
- You successfully meet Proof of Identity requirements.
Further savings and changes
Insurance duty on lenders’ mortgage insurance has been abolished for all borrowers, representing considerable savings, not just for first home buyers.
Mortgage insurance generally allows borrowers with less than 20% deposit to obtain a home loan. The insurance protects the lender if the borrower cannot repay the loan and the property needs to be sold. With the elimination of duty, buyers who are required to take out mortgage insurance for a home valued at $800,000 will be around $2,900 better off.
Speedier development approval processes and plans to build compact ‘smarter’ homes in appropriate medium-density areas are expected to improve housing supply and affordability, particularly for those first entering the market.
The State Government has also budgeted for significant funding boosts for infrastructure and capital works to support increased demands by additional housing supplies.
Why do we have these incentives?
The reforms aim to alleviate some of the competition between investors and first home buyers who are generally hard-pressed to buy property in a competitive market.
By increasing the incentives for first home buyers and imposing higher taxes and duties on investors, it is hoped that the playing field might end up a little more even. For foreign investors, the surcharge on stamp duty has doubled from 4% to 8% and land tax has increased from 0.75% to 2%.
Investors in off-the-plan properties, whether local or foreign, will now need to pay stamp duty within three months of exchanging contracts rather than deferring payment for fifteen months, as is generally the case for off-the-plan purchases. Off-the-plan purchasers intending to use the property as their main residence will still be entitled to defer payment of stamp duty for fifteen months from the date of exchange.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 8014 5885 or email email@example.com.