The Victorian Government announced recently that stamp duty (land transfer duty) will be abolished for first-home buyers purchasing a home with a dutiable value of not more than $600,000.
This will make the existing first-home buyer 50 per cent duty reduction that applies to the purchase of a home with a dutiable value of not more than $600,000 a full exemption. Source: State Revenue Office
So, as a first home buyer, should you hold off buying until the new financial year to take advantage of the change?
Currently, if purchasing a first home in Victoria at a value of $250,000, the stamp duty payable is $4,435. For sure, this is a substantial amount of money for a budget-conscious first home buyer, and if it were as simple as waiting a little over 2 months, all else being equal, and avoid paying over four thousand dollars, then surely this money is better in your pocket than the government’s, right?
Maybe not. Because all else may not be equal.
Personally, I have had a handful of budding first home buyers mention putting their search on hold until the stamp duty saving comes into place, and if a few have mentioned it to me, guaranteed there will be several more thinking the same.
The property market is like any other – it is governed by supply and demand. When demand increases, this puts upward pressure on prices. Supply is absorbed by the increased demand, and there is less to choose from.
So, lets project the calendar forward to July, when, it seems, thanks to a government incentive designed to do exactly this, demand for first homes should increase. There is a very finite supply of suitable first homes on the market at any one point in time, and the sudden uptake of many of these is likely to lead to less choice for buyers, and an increase in prices, which may or may not be at least the equivalent of the stamp duty savings, or more.
No-one has a crystal ball, but if this happens as outlined above, suddenly the option of buying now rather than waiting is looking pretty good, when in the writer’s opinion there is more to choose from on the market and less competition for it compared to what is likely to be the case after July 1 when prices may also jump.
Pay $4,435 to the government now (on a price of 250k), or save this expense but potentially sacrifice on your choice of home and an inflated purchase price.
A few examples of some of the choices available to first home buyers looking to take advantage of what is on offer around Warrnambool right now are outlined below, click on the images for more details. It is unusual for these types of homes to sit for long on the market, and my prediction is that there won’t be as much choice far past July 1st. These samples are all in the sub-$300,000 price category.
- 3 bedroom brick beauty in Koroit, with extra bar-room off the garage, priced at only $229,990:
- 3 bedroom updated weatherboard home in convenient Dennington location, with double garage, only $249,990:
- Near as good as new 2 bedroom townhouse with double garage, still a nice yard and on its own title, value at $299,900:
- 3 bedroom 1990’s built brick home with updated kitchen and good size yard, long single garage, all for only $299,900:
- 3 bedroom home on a large, subdividable block in Allansford, mostly renovated, priced at $285,000:
- 3 bedroom brick home in Warrnambool, rough inside but solid as a rock, at $210,000
- Another one needing cosmetic work internally, but again, a solid 3 bedroom brick home with good size garage at $229,900:
- This bedsitter unit at only $89,990:
- 1 bedroom, central unit walking distance to CBD, only $99,990:
- 2 bedroom unit in excellent condition and handy location, $189,990:
- Free-standing 2 bedroom unit with garage and sizeable yard, $235,000:
It is worth noting (particularly in our regional area) that from July 1 the Victorian Government has also announced that it intends to increase the First Home Owner Grant (FHOG) from $10,000 to $20,000 for new homes built in regional Victoria and valued up to $750,000.
This extra grant, combined with the stamp duty exemption, is most certainly worth considering waiting for. However, for the same supply and demand reasons as outlined above, there is every chance that the increased government handouts are ultimately passed on to the developers and/or land vendors in the form of a land price spike as a rush of first home buyers do battle to get their hands on the available blocks of land.
However, I have targeted the bulk of this article at those first home buyers who are not looking to spend, even with a $20,000 contribution from the government, the mid $300,000’s + that is most often realistically required to get into, and properly complete, the new home build process.
Article by Lucas Wilson.
If you have any buying questions, feel free to ring me or any of the members of our sales team, any time, on (03) 5561 2777