The housing and property market is facing a radical shake-up as the Victorian Government implements changes to make property for buyers more affordable in the midst of a housing shortage.
The Good News
First home buyers are by far the winners in 2017 reaping great benefits from the government’s new property schemes. The two new schemes being introduced as of July are:
1. Stamp duty reduction for First Home Owners
The Victorian Government announced in March that first home buyers will be exempt from stamp duty tax if the property is valued at under $600,000.
The proposed scheme proports to benefit 25,000 Victorian first home buyers every year, saving $15,535 stamp duty on a $600,000 property. For homes valued between $600,000 and $750,000, tax discounts will be applied on a sliding scale.
Further good news is the exemption and concession, unlike the first home owners grant, will apply to both new and established homes.
2. Increase of First Home Owner Grant (FOHG) in Regional Areas
For home buyers in Regional Victoria, the government is implementing a stimulus; the First Home Owner Grant will double from $10,000 to $20,000 in an attempt to help overcome the housing affordability crisis.
According to the Victorian government, this will help approximately 6,000 first home buyers, particularly younger people in regional Victoria to build and live in their own community, boosting local construction jobs and further developments. It will also promote decentralisation by moving young people out of the already congested Melbourne into growing large regional cities.
The Kind-of Good News
1. New Restriction to Off-the-Plan Concession
Originally, the concept of buying off the plan (OTP) became extremely appealing to home buyers and property investors alike due to the substantial stamp duty savings.
The new changes are:
· Buyers of OTP commercial properties or residential investment properties (not yet built) will be liable to pay stamp duty on the purchase price or the market value of the property (whichever is higher)
· First home buyers of residential properties (not yet built) will be eligible for the OTP duty concession
· Buyers of residential properties intended to be the principal place of residence (not yet built) will be eligible for the OTP duty concession
This is further good news for first home buyers and people looking to buy a new home for themselves. Adversely, the potential effect of this new scheme is that it may deter property investors from buying and investing. However, it is doubtful the effect will be drastic.
The changes are estimated to generate an additional $841 million in stamp duty revenue, and the Government intends to use this revenue to offer new stamp duty exemptions and concessions to eligible first home buyers.
2. New Tax levied at 1% on Vacant Residential Property
As part of the Government’s strategy to tackle the rising housing shortage, owners who leave properties vacant will also be imposed with a new tax.
The new Vacant Residential Property Tax has been introduced in an effort to address the number of properties being left empty across Melbourne. By making these vacant houses available for sale or lease, the government hopes to alleviate some of the shortage.
Properties left unoccupied for more than six months a calendar year, will be levied at one per cent multiplied by the capital improved value. Accordingly, the owner of a vacant apartment with a CIV value of $500,000 will pay an additional $5,000 tax per annum. It is expected to raise about $80 million over four years in state revenue.
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