Proposals by the NSW government to give home buyers the choice of paying land tax rather than an upfront stamp duty could save thousands in the initial years of homeownership, according to experts.
“We are proposing a once-in-a-generation reform to make homeownership more affordable and achievable, and the engagement and interest from across all segments of the community has been significant and heartening,” says NSW Treasurer Dominic Perrottet said.
High property prices are one thing, but buyers also face overwhelming upfront costs in the form of stamp duty.
“The biggest hurdle hopeful homeowners face when entering the property market is coughing up a hefty stamp duty fee,” says Shannyn Laird, head of customer experience at property management agency Different.
“This is true particularly in NSW where stamp duty is extremely high compared to other states.
Under the proposals, buyers would have the choice between paying stamp duty upfront or a yearly land tax. Choosing the latter could flatten the cash flow demands on new owners.
“Replacing current stamp duty schemes with an annual land tax will be a positive step forward not only for Aussies, meaning more people can enter the market but also for the state to avoid pricing out investors, who may look to invest in other states instead.”
This change could slash thousands off the cost of a home.
“The proposed land tax could also mean significant savings over the lifetime of owning a home. If you consider the average length of homeownership is 11 years, paying about $1000 annually with land tax versus $20,000 upward, upfront with stamp duty, you can see the considerable savings to be had.
Laird adds that house flippers, whose ownership length is even shorter, also stand to benefit.
But this reform is a slow burn. In the meantime, the government has proposed a $25,000 grant that would replace the stamp duty tax concessions. But Laird warns that it’s far from a full fix.
“Even with the first home buyers grant, the criteria is tight, so not every first home buyer will be able to access this grant,” says Laird.
“The rest are left forking out anywhere from $20,000 upwards on stamp duty.”
With property prices continuing their march skyward, Laird says more is needed to blunt the price pain of owning a home.
“If the government is serious about creating a fairer property market, change needs to happen, and it needs to happen soon,” she says.
“First home buyer grants and changes to stamp duty taxes is a positive step forward, but I’m eager to see what is actually passed on Tuesday, and when the changes will come into effect.”