Stamp Duty Changes Finalised for First Home Buyers

The Labor government has recently finalised changes to stamp duty, which will affect first home buyers in New South Wales.

Currently, first home buyers can have their stamp duty waived up to a property value of $650,000, with a reducing concession available up to $800,000, and the option to opt-in for land tax between $800,000 and $1.5 million.

However, starting July 1, 2023, the new changes will come into effect, which will waive stamp duty up to $850,000, reduce the concession from $850,000 to $1 million, remove land tax, and eliminate any further discounts or concessions over $1 million.

It is important to note that these changes will be applicable on the contract of sale date, rather than the settlement date, allowing for a window of opportunity before the changes come into effect.

As there will be no discounts over $1 million after the 1st of July, there will be an increase in buyer activity, leading to higher prices in this range. However, prices are expected to cool after July 1, as full stamp duty will apply, resulting in an additional ~4.5% upfront cost for first home buyers.

It's worth mentioning that by saving approximately 4.5% on stamp duty upfront, the deposit can be larger, and the borrower may potentially avoid paying Lenders Mortgage Insurance (LMI). For instance, if someone is buying a property for $1 million with a $210,000 cash deposit, they could save $8,600 in LMI since the Loan-to-Value Ratio (LVR) is less than 80%. Additionally, banks tend to offer lower interest rates on loans below 80% LVR, which can lead to further savings in interest payments.

If you were planning to buy a property between $1 million and $1.5 million, it's recommended to consider acting before the new changes become effective to take advantage of the current opportunities.