The recent NSW government election saw the Australian Labor Party (ALP) emerge as the victors, marking the end of a decade-long tenure of the Liberal-National coalition government. With a new government comes new policies and promises, and many first home buyers are keen to understand how the change in leadership will impact them.
The ALP campaigned on a platform of housing affordability and promised to introduce a range of measures to help first home buyers enter the property market.
We’ll take a look at some of the ways in which the new government's policies might impact first home buyers in NSW.
Stamp Duty Concessions
The ALP promised to provide stamp duty concessions for first home buyers purchasing existing homes. Under the previous government, first home buyers in NSW were eligible for a full exemption on stamp duty for homes valued up to $650,000 and a partial exemption for homes valued up to $800,000.
Those property price brackets have now change.
Under the new NSW Labor policy, first home buyers will receive a full concession on properties up to $800,000 and a reduction in stamp duty for homes valued up to $1 million. This could be a significant saving for buyers in NSW, particularly in the current market where property prices continue to rise. According to figures modelled by the Parliamentary Budget Office, this equates to roughly 95% of all first home buyers in NSW.
Removal of First Home Buyer Choice scheme
The previous Liberal government had introduced an option in 2022 for First Home Buyers to choose to either pay stamp duty in a lump sum or pay an annual property tax on the property. This had enabled First Home Buyers to reduce their entry costs into buying by selecting the property tax option whereby a tax was calculated on the land value and paid each year of ownership, instead of stamp duty.
Under the newly elected Minns Labor Government, the NSW Government will now abolish the First Home Buyer Choice scheme, reverting to the new stamp duty concessions as mentioned above.
Over 4,200 First Home Buyers had selected the First Home Buyer Choice options since it was rolled out in November 2022.
For those First Home Buyers who had already selected the property tax option there will be a grace period and it would be unlikely that the new NSW government would reverse any existing arrangements. We will continue to monitor this and keep you updated.
How First Home Buyers will be affected depending on purchase price bracket
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The changes being implemented will have differing effects on first home buyers depending on their purchase price. For example, first home buyers looking to purchase a property up to $1,500,000 and had selected the ongoing property tax option will now be at a disadvantage under the Labor government changes. As the new NSW government will abolish the First Home Buyer Choice scheme, these first home buyers will have no other option than to pay the full amount of stamp duty.
There is a small window of opportunity to complete a purchase utilising the First Home Buyer Choice option before the Labor Government abolishes the scheme. First Home Buyers looking to utilise this option should do so quickly.
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First home buyers looking to purchase properties in this price bracket will be eligible for a discount on the stamp duty. It is likely that the discount will be approximately 50%, however we are yet to receive confirmation of the concession.
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First home buyers looking to purchase a property below $800,000 will have no stamp duty payable under the NSW Labor Government.
‘Build to Rent’ program in regional areas of NSW
Under the Minns Labor Government a new ‘Build to Rent’ program will be introduced to deliver more affordable rental housing for regional NSW. This will kick off with $30 million for a pilot program on the South Coast of NSW. Landcom, a large scale developer in NSW, will be engaged to identify existing surplus government land to acquire and build low cost housing on. The properties built on this land will be rentals only and be managed by a government agency. A minimum of 30% of all new homes built under the ‘Build to Rent’ program must be set aside for social, affordable and universal housing.
Whilst this doesn’t directly affect first home buyers ability to purchase, First Home Buyers looking to purchase an investment property close to a ‘Rent to Buy’ area may find they have less demand for their rental property given a low cost option provided by the government is within the vicinity.
Impact on the property market
The policies proposed by the ALP could have a significant impact on the NSW property market, particularly in the short term. The increased property price thresholds eligible for stamp duty concessions could lead to increased demand for new and existing properties, which could drive up property prices.
However, the stamp duty concessions could also encourage more people to sell their properties to cash in on the demand and potentially increasing the supply of homes on the market. It is likely we will see a first home buyer frenzy again between April and November 2023.
Impact on the lending market
The good news for first time buyers is that the removal of stamp duty up to $800,000 provides many more first home buyers with access to the market as they don’t need to have cash available to pay stamp duty. A concession on stamp duty for purchases up to $1,000,000 will also see first home buyers in this price bracket benefit from a slightly higher borrowing capacity due to the discount on stamp duty.
However, first home buyers looking to purchase a property up to the value of $1,500,000 will be disadvantaged as they will now have to pay the full amount of stamp duty following the abolition of the First Home Buyer Choice scheme.
It is likely that we will see a significant increase of first home buyers into the property market in 2023, regardless of interest rates. The savings made by buying with no stamp duty payable far exceeds the cost of a higher interest rate.
We are also expecting interest rates to start to decrease towards the end of 2023, further driving demand.
When will these changes come into effect?
Whist we don’t have a definitive date on when the stamp duty concessions will be enacted, there is always a transition period between government policies. We will update this article as soon as we have further information.
If you are a first home buyer, we can provide you with calculations to show how these stamp duty changes can improve your borrowing capacity.