Home Insights Winners and losers of proposed stamp duty change for NSW first-home buyers

Winners and losers of proposed stamp duty change for NSW first-home buyers

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If Labor wins the New South Wales elections in March, they have promised a major overhaul of the stamp duty for first-time homebuyers.

The proposed change does two things. First, it expands available existing primary homebuyer concessions, and second, the policy rolls back what was recently introduced. First home buyer selection A scheme that allows first-time buyers to choose between stamp duty or annual land tax.

For a reasonable percentage of buyers (around a quarter), these proposed changes would likely mean a reduction in overall burden.

But with the new concessions not available on homes over $1 million and without the option to pay land tax instead, about 30% of first-time homebuyers could end up worse off.

So what’s changed? Who wins and who loses? And what does this mean for the real estate market as a whole?

Stamp duty is a major barrier for many first home buyers.Photo: Getty


What are your current options and proposed changes?

Under current regulations, first-time homebuyers can take advantage of two schemes that can help them save significantly. Initial burden of stamp duty.

The first is the reduction of stamp duty.

You do not have to pay stamp duty on your first home purchase under $650,000. In addition, a discounted stamp duty rate is available for homes under $800,000. It starts at $0 for $650,000 and escalates to normal stamp duty rates for $800,000 worth.

NSW Trade Unions are proposing to expand this programme.

The proposed change would lift these bands so that homes worth less than $800,000 would pay no stamp duty and homes worth less than $1 million would pay reduced tax.

But there is also another option now available to first-time homebuyers that the New South Wales Department of Labor is proposing to do away with.

ever since November 11, 2022the original homebuyer could opt out of paying stamp duty and instead pay an ongoing annual land tax. [1]

This option is generous and much cheaper than stamp duty for most buyers.

For example, a buyer spending $750,000 would have to stay home for almost 14 years before their annual land tax payment would exceed the already concessed upfront stamp duty. [2] This is longer than people normally stay at home.[3]

Will FHB pay more or less under the new proposal?

Simply put, first-time buyers (like quarters) get an edge. But in many cases, as many as 30% end up in a worse situation.

The longer answer depends on how expensive the house you bought is and how long you want to live in it.

  • For first-time homebuyers looking for a value home in between $650,000 to $800,000, the proposed changes would obviously make them better. They will not pay stamp duty or land tax.Now they are eligible for land tax or stamp duty relief – but those options are still much more than that. number stamp duty.
  • For those looking for a house in between $800,000 to $1 million, it depends. Under the proposed changes, buyers paying stamp duty will pay less.But they lose the option to pay number Instead of stamp duty, you pay annual land tax. Unless you plan to stay in your home for an extended period of time, losing this option means that buyers at the high end of this bracket will likely be at a disadvantage. It would still be higher than the land tax they would have paid had they remained an option. Buyers at the lower end of this bracket are likely to have a better life – the new lower stamp duty will be cheaper than the cumulative amount they paid in land tax.
  • Those who want to spend time between $1 million to $1.5 million obviously getting worse. There are no concessions over $1 million under the proposed changes. These buyers now have the option of land tax. This, as mentioned, will be significantly cheaper for most people.
  • For those who consider the above costs $1.5 million,There is no change. There are currently no concessions available and no proposals.Similarly, those expenditures Under $650,000 Neither are affected – they do not currently pay stamp duty and will never do so.

So how big are these groups?

One way to get an idea of ​​the relative size of these groups is to look at how much last year’s sales were in each group.

These data suggest that 23% of all Sydney sales fell in the $650,000 to $900,000 range, suggesting that the proposed changes could certainly or possibly lead to lower overall costs. there is.

Conversely, about 30% of sales (ranging from $900,000 to $1.5 million) would pay more under the proposed change, as the proposed change would eliminate the current land tax option. will be

An important note here is that this analysis is a bit skewed. all Not just first home buyers.

First-time homebuyers tend to buy more affordable homes, so the bottom tier share is probably a little higher than the analysis above suggests, and lower for the more expensive tier. [4]

What wider impact will this change have?

In terms of its overall impact on house prices, this shift is probably being washed out as there are forces pushing in the opposite direction.

academic research It turns out that the higher the stamp duty, the lower the house price. So if you raise the concession and lower the stamp duty, that $650,000 to his $1,000,000 slot price will go up.

However, removing the option to exempt stamp duty and pay land tax in the range of $1 million to $1.5 million, enhance such as stamp duty for those buyers low The price in that parenthesis.

The net effect of these two opposing forces is ambiguous, but probably not particularly large. These forces are offset and first-time homebuyers represent a significantly smaller share of the overall market. [5]

While these changes will be a welcome relief for some homebuyers, they will have little impact on the broader housing market.

To tackle the affordability issue, we need to build more housing.Photo: Getty


For one, these changes do not address long-term housing affordability.

The proposed changes could help cut initial costs for some first-time homebuyers and help them buy sooner.

The only long-term sustainable way to make that happen is to build more homes that people want to live in.

Secondly, these changes do not extract any benefit from the reduction or elimination of stamp duty. work in the opposite directionRolling back the First Home Buyer’s Choice scheme would pave the way for further stamp tax reform, benefiting a wider cohort of buyers including: done in ACTwill be closed.

Amendments to stamp duty.

Stamp duty is a very inefficient tax because it deters people from going home.

This means people are less likely to move to places with better job opportunities or stay longer in homes that are too big or too small for their needs.

This slows economic growth and makes housing less affordable. NSW Treasury quote Eliminating stamp duty could have a $10 billion economic value.

First-time homebuyer concessions alone will not solve the economic drag on stamp duty. Long-term reform is needed.


[1] This tax is $400 plus 0.3% of the value of the land (that is, the value of the land only, excluding the building) for owners and occupiers.

[2] This is a very simplistic calculation that assumes land prices are 50% of the transaction price and does not discount future land tax payments (nor does it index them to account for land price growth). ). While these features change the exact numbers, they also significantly change the conclusion that the payback period is significantly longer than the tenure of a typical first homebuyer.

[3] New South Wales Financial Analysis The median tenure of owner occupants is just over 10 years. First-time homebuyers weren’t analyzed individually, but they probably had shorter tenures.

[4] That said, the above analysis is also fairly conservative in choosing $900,000 as the breakeven point between land tax and concessions. Under the First Home Buyer’s Choice scheme, it will take 11.5 years for the land tax on a $900,000 home to pass the stamp duty. Even an $850,000 house will take six years.

[5] Recent ABS lending data shows that first-time homebuyers account for about one-sixth of loans.

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