NSW pauses stamp duty for first home buyers

By Niko Iliakis ·

The NSW government has announced that stamp duty will be temporarily eliminated for first home buyers purchasing newly-built homes, as the state looks to the residential construction sector to spearhead economic recovery.

The changes will come into effect on 1 August 2020, and will raise the current stamp duty exemption threshold from $650,000 to $800,000 for first home buyers. Discounts will also be offered at a tapered rate on homes valued up to $1 million.

Importantly, the exemption will only apply to purchases of newly-built homes, meaning those looking to buy existing houses and apartments will not be eligible. It will also be kept in place for 12 months.

NSW Premier Gladys Berejiklian said the move will offer some much-needed support to the building sector, which faces a diminishing supply of work, and allow first home buyers to begin their property journey sooner.

"Thousands of people will see their bank balances benefit from this change - it will help get more keys into more front doors of more new homes," she said.

"It will also boost housing construction across NSW and support jobs in the building industry at a time when we need them more than ever before."

It’s predicted that the changes will help up to 6,000 Australians. According to NSW Treasurer Dominic Perrottet, the increased threshold will spare first home buyers from having to pay up to $31,335 in stamp duty on a new $800,000 home.

Who will benefit the most?

Mozo’s property expert Steve Jovcevski welcomed the changes, but said they won’t be much help for Australians looking to buy a free-standing house within reasonable distance of the Sydney CBD.

“The NSW government has realised the previous caps weren’t relevant, and they’re focusing deliberately on new homes as they provide a greater benefit when transacted than established homes,” he said. 

“But the reality is today’s decision is unlikely to benefit people buying houses unless those properties are at least 40 km out from the CBD. You simply can’t get a new home 15 to 20 km from the CBD for under $1 million.”

At the same time, the stamp duty exemption could be a boon for those looking to purchase an apartment in the middle ring of Sydney, especially when coupled with any existing discounts on prices from developers.

“I think it’s going to help sell some of these apartments that are struggling to find buyers. It seems to be that houses are performing better than apartments, and the move may encourage first home buyers to start looking in areas where there is a bit of an oversupply,” Jovcevski said.

Is there more help available?

Support for NSW first home buyers isn’t just limited to stamp duty waivers. Currently, there are multiple programs designed to help Australians take their first steps on the property ladder.

Chief among them is the First Home Loan Deposit Scheme, which commenced its second round this month. Under the scheme, eligible first home buyers can purchase a home with a deposit of at least 5%, with the government guaranteeing the remaining amount.

This allows borrowers to avoid having to pay for lenders mortgage insurance (LMI) — a type of insurance which protects a lender from loss in case customers default on their loan. In many cases LMI can cost up to 4.5% of the amount borrowed.

Some banks have even begun offering discounts on LMI themselves. Earlier this month, St.George announced it will be reducing LMI to just $1 for first home buyers with a deposit of at least 15% of a property’s value.

Also worth mentioning is the HomeBuilder Scheme. Announced in early June, the scheme offers grants of $25,000 to those purchasing newly-built homes or making substantial renovations to existing ones. 

If you’ve got your sights on the property market and have received a confidence boost from today’s announcement, make our home loans comparison page your first stop.

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