Victorian Government’s Stamp Duty Waiver May Cause More Harm Than Good
Tristan Larkin - Tomii Buyers Agents
Buyer’s Agent | Expert in securing off-market and pre-market properties in Melbourne and the surrounds of VIC
In This Week’s How's The Market | Edition 86
Victorian Government’s Stamp Duty Waiver May Cause More Harm Than Good
This week the Victorian government released a new policy change reducing stamp duty on off-the-plan purchases for apartments, units & townhouses.
In their official release, they said “More homes mean more opportunity” and their social media posts have said this change is for “young people and families”.
Though is this really a great thing for young people and families?
Currently, first-home buyers and owner-occupiers can already access a stamp duty concession when they buy off-the-plan, allowing construction costs to be deducted from the sale price when calculating how much stamp duty they owe.
This has been capped for first-home buyers at $750k with deductions tapering off from $600k.
What this change will do is remove the cap on off-the-plan sales prices allowing more expensive purchases.
However, the major change is that this scheme is now open to investors as well as downsizers/upsizers.
In other words, those people who already have a property or are looking to invest in property will benefit from the scheme and first home buyers who already are able to access a lesser version of this scheme will essentially only be able to pay a higher price.
This seems like a good move from a government perspective as it may encourage those already living in established dwellings who are looking for a change to sell, creating stamp duty for the purchaser.
The downside of this scheme for purchasers is that, typically, off-the-plan sales result in a financial loss for those who purchase them.
If this scheme increases supply, there is also a good chance that it is more likely those who purchase through this scheme will lose money.
I worry many investors will fall for this and lose large amounts of money.
Just two weeks ago I was speaking with a property manager who leases properties specifically around the Southbank area in Melbourne.
She said, there are currently 1400 properties sitting vacant and available for lease in the Southbank suburb alone - hardly a lack of supply - it’s more that people do not want to live in these apartments.?
Realestate.com shows that there could be a lot more.
Encouraging investors as well as upsizers/downsizers to add to this supply doesn’t seem like great policy for young people and families, nor investors.
What would be great to see is if this stamp duty waiver currently in place for first-home buyers was to be raised from the $600k cap introduced in a much cheaper market in 2017 up to a more reasonable $800k limit.
Many of the first home buyers we know and work with end up paying full stamp duty as it becomes more unrealistic to find a home under $600k.
The biggest benefit of this policy is that it may encourage downsizers into new and modern apartments and put more larger established homes on the market for upsizers.
However, I fear that many first-home or younger buyers will take advantage of this scheme and end up losing money causing more harm than good.
What The Agents Are Saying
Last week was a big auction weekend in the inner east of Melbourne with some large results in the top end of the market across Hawthorn, Camberwell, Glen Iris, South Yarra and other suburbs.
As the top end of the market is going strong, it seems that some of the good stock is starting to dry up.
Agents are now pushing the narrative that we are in the final weeks of properties coming online.?
As we get closer to Christmas, this will become more prominent in the dialogue.
In the circa $1m market - competition is still strong for units with a bit of land in good streets. I spoke with some agents last week in Bentleigh who had 8 building and pest inspections completed prior to auction for a home that ended up selling for $1.1m.
The apartment market is seeing widely varying results according to agents with properties still selling quickly that are priced well, staged and in good condition.
Many agents have reported that buyers have a much larger pool of properties to choose from in this segment of the market making it harder to sell and auctions haven’t been working as the main method of sale.
The Wow Factor!
Here’s a rare chance to own a property that exudes elegance, history, and endless potential.?
Built-in 1879 and set on 40 acres, this may be the most impressive property in all of Beaconsfield.
Check out the facade and the period details!
Price Guide: ?$6,500,000 - $7,150,000
In The Media?
As the Reserve Bank has stated that rates are expected to remain stable this side of Christmas, CBA Bank predicts interest rate relief before year-end, with a 1 in 3 chance, down from 50% chance after strong employment gains.
The bank predicts slow economic growth and a 1.0% year-on-year inflation rate, while underlying inflation will remain above the RBA's target band for some time.
There were 2,510 auctions held on the auction front, a decrease from the 2,598 held the previous week.
Last week, 1,069 Melbourne auctions were held, with over 1,000 properties under the hammer for the third consecutive week.
Final Thoughts
Stamp duty changes may have a slight effect on the Victorian market, though nothing too immediate as many of the results of these changes won’t be felt for likely over a year due to build times.
It may encourage more buyers to hold off on purchasing an established property if they were already on the fence about buying something new off-the-plan.
If you or someone you know would like assistance to buy this year in these markets, book in a call and we can discuss if we can help.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at [email protected]
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.