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.
Wilsons 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 us, 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.