As of the 1st of July, first home buyers in Victoria will not have to pay stamp duty on property up to $600,000. A sliding concession scale will apply for property purchased between $600,000 and $750,000.
The new policies were announced by the Victorian government last Sunday and are some of the most significant to directly assist buyers in recent years.
This sounds like a golden opportunity at first, but there are a few factors at play before buyers get too excited.
There’s going to be more competition
First home buyers are going to play a bigger part on auction day. Unburdened by stamp duty, they can afford to bid with a bit more confidence than they otherwise would. There will be more competition as a result which will likely have an effect on prices.
First home buyers should consider how they can best take advantage of the changes to Stamp Duty
Properties priced at the entry level – around $450,000 to $500,000 – will attract the most attention. This will especially be the case for townhouses and apartments, and properties in the middle ring out from the city (more than 10kms). Buyers need to be prepared that if they go after property after the 1st of July, there will likely be more activity around this type of stock.
Housing stock in estates further out will likely provide buyers with the more options where there is more supply.
Don’t over pay
Having $15,000 or more knocked off your mortgage is a dream for a home owner. But buyers should be wary of over paying for property.
First home buyers can absolutely push a bit harder in order to get their desired property – if they need to. For example, if at auction it comes down to two, three, or four thousand, buyers should go for it. They do have an advantage, after all.
But they do need to be wary of over spending. Adding their Stamp Duty savings to their budget will 1) inflate the value of the property, and 2) take away the savings they are making. Buyers need to remember they should get the property for the lowest possible price, using all of the savings would only work against them in the long term.
Having said that, the stamp duty savings does allow buyers to look at properties that may have previously been just out of their price range. In that regard the savings are a great opportunity.
It may not be worth waiting for July 1
If buyers are thinking of holding off until after the changes come in on the 1st of July, they shouldn’t. For buyers who were previously wanting to spend up to $600,000, they would save about $15,000 in stamps under the old system. If they wait until July to get those savings growth in the market will likely over take the savings they will make.
For example, median dwelling prices in Melbourne were $610,000 at the end of February according to recent CoreLogic data. In the three months to March, the median unit price moved up 5.5%, or a bit over $33,000. How much prices move between now and July only time will tell, but it is almost certain prices are going to continue creeping upwards.
If buyers wait until these policies take affect they may lose out on most or all of the savings as the market moves upward. They shouldn’t wait if they are looking at the perfect home now. They should seriously consider pursuing it now.
Exactly what affect the abolishment of Stamp Duty will have on the market remains to be seen, but buyers will need to be aware of potential factors like increased competition or paying too much for a property.
Thankfully these are issues that can be handled by an experience Buyers Agent. With the savings made from not paying Stamp Duty, investing in the expertise of a Buyer’s Agent would be the best thing for first home buyers to do to get an advantage over the rest of the market.