The Effects of Changes in Stamp Duty on the Building Industry
Melbourne’s real estate market is growing more and more competitive by the year, and it is becoming increasingly difficult for first home buyers to find housing that they can afford. As a result, the Victorian government has recently announced a raft of measures aimed at helping first home buyers, with one of the more talked about initiatives being changes to stamp duty. Under the new scheme, first home buyers purchasing new or existing homes that are worth less than $600,000 are exempted from having to pay stamp duty, which potentially leads to savings of up to $15,000. The move is aimed at helping to make first home buyers more competitive against investors. It is also expected spur the development of the 17 new suburbs that the government has announced that they are seeking to add to Melbourne, as well as encourage more people to move to regional Victoria.
However, the new measures have not been universally welcomed. Many voices both in the real estate industry as well as the public sector have raised concerns that cutting stamp duty does not solve the problem, and may actually make things worse in the long run. Let’s see what each side has to say…
Who’s really paying the price?
The stamp duty exemption is being sold as a win for first home buyers, but some are saying that the true winners are property developers. There is concern that, like the First Home Owner Grants, this new measure could result in developers pushing the price of housing upwards, thus negating the benefits for first home buyers in the long run. Instead, it would be the sellers that receive most of the benefits of the scheme.
It could drive away investors
Being exempt from paying stamp duty is all about empowering first home buyers and giving them a greater competitive advantage over investors in the real estate market, who naturally have much more disposable income than first home buyers in general. But property develops are worried that the flow-on effect of the change could lead to investors looking elsewhere, which in turn could lead to less apartments and housing being developed and affect affordability for both private purchases and renters alike.
The changes in policy are largely to make outer Melbourne and rural Victoria a more appealing prospect to first home buyers and young families. However, the savings and lower prices may not be enough to offset the disadvantages of living in these areas for many Melburnians — mainly, the lack of facilities such as schools, shopping precincts or (particularly in the countryside) employment opportunities.