Stamp duty is being abolished for first home buyers in Victoria as part of changes the Government is making to existing legislation. Stamp duty adds significant costs to property purchases, so this change will reduce the fees that property seekers will be up for. However, it may not necessarily make housing more affordable.
It could allow first home buyers to enter the housing market sooner
The Victorian Government is trying to make the state’s housing market more affordable. By abolishing stamp duty, they are certainly eliminating a major cost involved in purchasing a home.
Victoria has one of the highest stamp duty rates in Australia – $31,070 on a property valued at $600,000, according to the State Revenue Office. Under existing legislation, first home buyers who are eligible for the First Home Owners Grant (FHOG) are also entitled to a stamp duty reduction of 50 per cent. Even with this reduction, this is still thousands of dollars on top of a mortgage deposit.
The elimination of stamp duty is designed to enable first home buyers to increase their purchasing power, as the amount they would have put aside for stamp duty can instead be put towards their deposit.
In Melbourne, where according to the Real Estate Institute of Victoria, median house values are currently sitting at $826,000, this means that young people could potentially afford to buy closer to where they work, instead of looking further afield to buy their first property.
It may push housing prices up
On the flip side, eliminating stamp duty could actually push housing prices up. With more people being able to afford to pay more, values could increase, as Treasurer Scott Morrison told 2GB radio.
“If [changing stamp duty legislation] just means people bid up more in the auction because they can borrow more, because they don’t have to pay stamp duty, well obviously, that will just take prices in one direction.”
The impact of the changes to stamp duty legislation will not be felt until later in the year, so time will tell.
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