The Victorian government has announced significant stamp duty reductions for off-the-plan homes, aiming to address the state’s urgent need for more housing supply, PropTrack reported.
Previously limited to first-home buyers and owner-occupiers, the concessions are now open to all buyers, including investors, with price caps removed.
Economist Anne Flaherty from PropTrack sees the reform as timely.
“This move comes at a critical time when boosting housing supply could not be more necessary,” Flaherty said.
Under the new rules, stamp duty will only be applied to the land value of off-the-plan developments purchased before construction begins, rather than the total property price.
Buyers could save up to 75%, with an example purchase of a $620,000 apartment cutting stamp duty costs by approximately $28,000.
The concessions will apply for one year starting 21 October 2024 but are limited to strata-titled properties, such as apartments and townhouses. House-and-land packages remain ineligible.
This policy shift comes as Victoria faces a shortage in high-density housing development.
Data from ABS showed that new loans for construction dropped 20% in August compared to the previous year, while purchases of residential land fell by 34%. Additionally, only 3,517 non-house dwellings began construction in the June quarter – marking the lowest level since 2009.
“High construction costs have plagued the sector, reducing the feasibility of many apartment projects,” Flaherty said.
While house developments have remained stable, new apartment construction is struggling to keep pace.
The affordability gap between available and desired apartment prices complicates the market.
In September, only 20% of new units listed in Greater Melbourne were under $600,000, yet 63% of buyer inquiries sought apartments in that price range.
“If the stamp-duty discount can redirect more demand to new units, it could help boost pre-sales and support project feasibility,” Flaherty said.
Including investors in the stamp duty concession is another positive move.
“Investors can have a lot to gain from buying new,” Flaherty said.
New properties offer better depreciation benefits and higher rental yields than older homes, which can provide significant tax advantages.
With rental vacancies at just 1.7% and investor sell-offs outpacing purchases for over five years, Victoria's rental market is in crisis. In the 2024 financial year alone, the number of rental properties dropped by more than 21,000.
While the stamp duty reform is a step in the right direction, questions remain about its effectiveness in reviving development. Flaherty remains cautiously optimistic.
“Victoria desperately needs more homes, and increasing incentives for buying new is welcome,” she said. “But whether this will be enough to shift the dial and drive development activity remains to be seen.”
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