The Victorian Government has recently announced a range of initiatives aimed at making housing more affordable for first-home buyers. Stamp duty will undergo major reform, with two significant changes set to affect the off the plan industry.
Up until now, stamp duty savings have been a huge incentive for investors and owner-occupiers to buy property off the plan. However under the new changes, first-home buyers of any property under $600,000 will no longer face stamp duty charges.
Furthermore, the existing stamp duty savings for investors of off the plan will be abolished. Only buyers who intend to live in the property or are first-home buyers will benefit from the tax concession.
The move is a blow to the off the plan industry in Victoria, with many expecting it will negatively impact the market. Victoria is one of the only states in Australia that offered stamp duty savings on off the plan projects, which has made it a popular option amongst both local and international investors.
While the state government says the removal of the changes will level the playing field for first home buyers, the Urban Development Institute of Australia lobby group said it would reduce investment and the supply of new homes. They argue that without the tax break investors would look to other asset classes, reducing demand for new projects.
Accounting firm KPMG’s state taxes partner Michelle Bennett agreed, telling the AFR the move could have negative consequences for the property market. “There are risks in reducing off-the-plan concessions for investors, as it could put the brakes on new residential development,” Ms Bennett said.
The changes won’t be retroactive, only affecting buyers who sign a contract after the 1st of July 2017. Whilst the changes will certainly have an impact on the VIC market, it only puts it in line with other Australian states that do not offer stamp duty concessions for investors. Regardless, savvy agents would do well to get their clients into a contract before June 30 to ensure they can make the most of stamp duty savings while they last.