Housing affordability has become a hot topic in NSW. Young first home buyers and the middle-class are particularly scorned due to Australia’s high cost of housing in proportion to wage growth.
Luckily, the NSW government has recently released a new package of measures designed to improve housing affordability across NSW and give a leg-up to those looking to break into the housing market. Foreign investors, on the other hand, will be receiving a slap on the wrist.
The NSW Government’s comprehensive package to improve housing affordability is focused on helping first home buyers, who often face stiff competition from investors.
For first home buyers, this comprehensive package will:
- abolish stamp duty on all homes up to $650,000
- give stamp duty relief for homes up to $800,000
- provide a $10,000 grant for builders of new homes up to $750,000 and purchasers of new homes up to $600,000
- abolish insurance duty on lenders’ mortgage insurance
- ensure foreign investors pay higher duties and land taxes
- no longer allow investors to defer paying stamp duty on off-the-plan purchases.
- Stamp duty abolished or reduced. Save up to $24,740 on a $650,000 home
- Grant of up to $10,000 for builders of new properties worth up to $750,000 and buyers of new properties worth up to $600,000
- Insurance duty on lenders’ mortgage insurance abolished
- Surcharge on stamp duty doubled from 4% to 8% and surcharge on land tax from 0.75% to 2%
- Investors of any kind will no longer be able to delay for 12 months paying stamp duty on off-the-plan properties
Stamp duty relief
The duty paid when buying residential property can be an obstacle for first home buyers. For those entering the market, the NSW Government is abolishing this duty on new and existing homes worth up to $650,000.
For properties valued at between $650,000 and $800,000, the duty concession will be gradually reduced.
Concessions on vacant land will remain unchanged.
How much could first home buyers save?
| First home purchase price | Ordinary stamp duty | Savings for first home buyers of new dwellings* | Savings for first home buyers of existing dwellings* | Total stamp duty charges for foreign investors (surcharge plus stamp duty)** |
|---|---|---|---|---|
| $500,000 | $17,990 | $28,768 | $18,768 | $57,990 |
| $550,000 | $20,240 | $31,451 | $21,451 | $64,240 |
| $600,000 | $22,490 | $34,361 | $24,361 | $70,490 |
| $650,000 | $24,740 | $26,857 | $26,857 | $76,740 |
| $700,000 | $26,990 | $18,786 | $18,786 | $82,990 |
| $710,000 | $27,440 | $17,172 | $17,172 | $84,240 |
| $750,000 | $29,240 | $10,950 | $10,950 | $89,240 |
| $775,000 | $30,365 | $6,922 | $6,922 | $92,365 |
| $800,000 | $31,490 | $2,896 | $2,896 | $95,490 |
*Total of stamp duty exemptions plus first home owners grant plus savings from LMI duty abolition (Genworth LMI Premium Estimator based on a first home buyer with a $50,000 deposit).**Does not include additional land tax surcharge.
When do these stamp duty savings begin?
This change will take effect from 1 July 2017.
Contracts dated prior to the commencement of these reforms will continue to be eligible for the same grants, concessions, and conditions for which they would have been eligible had these changes not occurred.
First Home Owners Grant (New Homes)
First home buyers building a new property will be entitled to a $10,000 grant on homes worth up to $750,000.
First home buyers purchasing a new property worth up to $600,000 will be entitled to a $10,000 grant.
This policy aims to provide assistance to first home buyers and stimulate the construction of new dwellings.
The $5,000 New Home Grant Scheme, which was available to other buyers including investors, will be closed.
Insurance duty on lenders’ mortgage insurance abolished
Insurance duty on lenders’ mortgage insurance is imposed at a rate of nine per cent of the premium. The removal of this duty will save all home buyers (first home buyers or not) money if they need lenders’ mortgage insurance.
This policy will take effect from 1 July 2017.
For example, on a home valued at $800,000, a buyer with a deposit of $50,000 who needs lenders’ mortgage insurance, could save about $2,900.
Foreign investors to pay higher duties
Foreign investors will pay higher surcharges when they purchase residential real estate. The surcharge on stamp duty paid on new purchases by foreign investors will double from four per cent to eight per cent, and the surcharge on land tax will rise from 0.75 per cent to two per cent. Foreign developers will be exempt from the increased surcharges.
No more stamp duty deferral for investors
First home buyers often face strong competition for properties from investors. To help counter this, the NSW Government is abolishing the 12-month deferral of duty for residential off-the-plan purchases by investors.
Buyers who are purchasing a home they plan to live in off-the-plan (regardless of whether they are first home buyers or not) will still be entitled to a 12-month delay in the payment of stamp duty, deferring payment from 3 to 15 months after settlement. But this concession will be closed to investors.
This policy will take effect from 1 July.
For more information head to : https://www.nsw.gov.au/improving-nsw/projects-and-initiatives/first-home-buyers/