The stamp duty exemption for first-home buyers — which has failed to keep pace with Sydney’s rapid price growth over the years — will be temporarily lifted to $800,000, up from $650,000, in a bid to support the construction industry and first-home buyers Premier Gladys Berejiklian announced on Monday.
Under the changes, which will last for 12 months from August 1, the stamp duty concession threshold will also be lifted from $800,000 to $1 million. The threshold on vacant land will also rise from $350,000 to $400,000 and concessions will phase out at $500,000.
“It will help get more keys into more front doors of more new homes,” Ms Berejiklian said. “It will also boost housing construction across NSW and support jobs in the building industry.”
The government expects more than 6000 first-home buyers to benefit from the changes, which could provide a maximum benefit of $32,335 for a first-home buyer who was also using the existing $10,000 First Home Owner Grant available for new homes worth up to $600,000 and house and land packages worth up to $750,000.
The increase to thresholds was long overdue, said Housing Industry Association (HIA) executive director David Bare, as the stamp duty exemption and concession cut-offs had never really kept pace with price growth in Sydney.
“This now opens up a much bigger market to those families wanting to purchase their first home,” Mr Bare said. “It will come in at a time when we’re expecting to see a drop-off in activity for new home building, with a huge drop-off in new home sales in March, April and the early part of May.”
Mr Bare said the changes would be complementary to the $25,000 HomeBuilder grant, which had lifted new home sales but been less effective in boosting construction activity in NSW, particularly Sydney, due to its $750,000 property price cap.In June, we had 212 per cent monthly increase in Western Australia, [but] only a 12.6 per cent increase in NSW and the reason is the difference in land value,” he said. “It only works in parts of Sydney.”
He said the move would have a significant multiplier effect which would help keep people in work in the construction industry.
It will also help reduce the time taken to save for a first home, said Domain senior research analyst Nicola Powell.
“This brings the thresholds more in line with the realistic cost of purchasing in Sydney, where the median house price is still above $1 million,” Dr Powell said.
“It will help to reduce the upfront cost for first-home buyers,” she added, which could bring forward buying activity but also sway some with savings to look to get into the market for the first time.
The issues with the $650,000 threshold was there was not a lot of stuff you could buy, it really limited you to a one-bedroom apartment. Going to $800,000 is quite a significant jump and with concessions to $1 million … you could get a two or three-bedroom property.”
On the flip side, increased demand for new homes could also drive up prices – unwinding any improved affordability offered by the stamp duty relief in the first place, Dr Powell said.
She noted the changes to stamp duty for first-home buyers could be a sign of things to come for the market, with the reform of the “inefficient” duty — long considered a barrier to market activity — on the table in the wake of the coronavirus crisis.
“It looks like [the government] is primarily interested in boosting housing construction, as opposed to transactions which help the real estate sector,” Dr Oliver said.
“It’s a big positive for first-home buyers, a big positive for housing construction in NSW and I suspect it will help limit the decline in housing construction. The sting in the tail, of course, is it supports the new market, but potentially draws buyers away from the existing market.”
Dr Oliver said the changes could help support demand for new properties, and subsequently prices, but only in the short term as housing demand in Australia was driven by immigration which had come to a standstill.
“If we don’t see immigration return with a reasonable time frame we could end up with an oversupply of property hitting the market,” he said.
He said he would not be changing his price forecasts, for a 10 per cent price decline in Sydney, off the back of the changes. He added while incentives and grants had often resulted in price rises in the past, it was unlikely in the current market.
Mr Bare agreed: “You’re not going to see prices ratchet up – it’s too competitive and business are trying to stay afloat and keep business coming through.”