BREAKING NEWS: Massive Stamp Duty cuts in Victoria for first home buyers

It's only for Otp, so pay on completion house and land would get caught, but not having two contracts, land and build.
Most new builds are two contracts. They are sold as one 'package' but the builder doesn't buy the land, just tees it up with the developer.

 

How much will this impact on developers? Is it mainly for apartments or subdivisions as well? Does it reduce developer margins and reduce investor competition in the FHB range?

 

It may assist developers who sell built properties that fall into the target price point to attract new buyers who will save money on their purchase and who will not need to personally fund the oncost of the duty - since lenders dont lend duty as such. This is intended to stimulate FHB demand of course. Increase demand "could" see developers raise prices in due course to compensate.

 

Governments smart. This was a strategic play, let the market grow so more land tax is payable whilst looking like their helping.

Why Australia’s Housing Bubble Will Only Get Worse

More realistically, the government has thrown a noose to young people to hang themselves with.
Why? You could say that the government’s move is idiotic, and argue convincingly that this move will simply push prices up by the amount of the stamp duty cut.
But it’s much worse than that.

Do you think these politicians are ignorant of the fact that any stamp duty cut will immediately capitalise into higher land prices?

I think they know full well how this will play out. They just don’t really care. When it comes to politics, it’s all about style over substance. It’s about looking like you’re doing something, while getting the maximum political benefit.

In this case, the government wants to look like its helping first-time homeowners by cutting the expense of buying a house. But it’s well known that this saving will immediately translate into higher prices for houses in that price range.

As the Financial Review reports:

‘“The idea of the initiative is well-intended but I think it’s going to be a disaster,” said Wakelin Property Advisory’s Paul Nugent.

‘“It’s going to lead to tremendous capital growth in that sub-$600,000 sector. It basically becomes a grant to the vendors more so than the purchasers.”’

Pushing prices up means more housing stock will rise above $750,000, increasing the government’s overall tax take.
It’s a win-win for the government. The only losers out of this are the people the government pretended to help in the first place.

It’s pure — evil — genius!

 

Thanks for your reply.

I guess the other part to my question is - how will this new FHB stamp duty exemption affect larger blocks of land >600sqm in outer ring suburbs which are currently dev targets? Pretty clear that FHB competition in that range will escalate but just wondering if the same will occur in RGZ areas that developers are interested in?
Or will the FHB competition reduce margins for developers post July 1st?

 

That's what I was thinking. Years ago the WA Government increased the FHOG to $15k I think. Anyway, the sub-$500k sector boomed... by more than $15k.

 

As Barny said, the governments know his this will pan out. It's just they want to be seen as 'helping out' the battling FHB's. Purely political.

Same thing happened in 2009. FHB's grants in Vic metro hit 32k to build. And 36k regional.
This sent the markets into an epic frenzy. Prices shot up rapidly. Anyone jumping in at the start, whether FHB or investor made a killing. Anyone who missed out just got further and further behind.

 

If you consider how you can leverage another $15k in savings at 90%, in theory it translates to another $100k in borrowing capacity (when roughly considering other purchase costs).

 

True. But us "poor" property investors got burned! I was trying to buy in that market but got easily outpriced by the FHBs. I had to sit on my hands waiting for the grant to drop back to the usual level so I could afford to buy an IP.

 

You are correct. This was suggested during the last year. To move away from the Stamp duty but increase the Land Tax.

March 22 2016
Abolish stamp duty and replace with land tax: McKell Institute report.

The $5250 a year tax that could change everything

 

No. The settlement date is irrelevant; it's the contract date that determines which stamp duty rules apply.

Sign a contract before 1 July = current stamp duty rules apply.

 

Thanks Kate.

 

Interesting. NAB is offering a special interest rate deal for first home buyers of 3.69% for 2 years.

So, in Melbourne first home buyers will have:
- no stamp duty where a property costs less than $600,000
- stamp duty discounts for properties worth between $600,000 and $750,000
- $10,000 FHOG when buying or building a new home valued up to $750,000
- 3.69% interest rates

This is all stacking up for a boom in the sub $600k sector and to a lesser extent, properties up to $750k

NAB announces changes to home loan interest rates | NAB News

 

Exactly what's been going through my mind after reading that announcement from Nab! other banks will follow for sure. Interesting times ahead!
Also, the Federal government will surely introduce it's own "Affordability" measures so might add more fuel to it!

 

So are there any exact numbers for the discount on properties between 600-750k? Unless I've missed it in this thread, I haven't seen the numbers anywhere....

 

Not yet, it will be announced as part of the Victorian State Budget process in late April/early May. The State Revenue Office will then publish detailed information.

 

Sou would it make more sense to build in new developments because of the 10k boost to new builds, or go established at 500k?

 

It depends. What are your goals with the investment?

 

Sell it for profit. I don’t mind triggering CGT. Not a buy and hold investor.