It would take more than a decade for first-home buyers in NSW to be better off opting for stamp duty over the state’s new property tax, though the scheme does risk inflating prices for properties under $1.5 million, according to Domain.
The First Home Buyer Choice scheme, announced last year, commences from January 16.
It gives first-home buyers the choice of opting into an annual payment of $400 plus 0.3 per cent of the land’s value when they purchase a property instead of paying a lump sum as stamp duty.
Purchasers paying $750,000 for their first home would need to live in it for 15 years before paying stamp duty would make better financial sense, the Domain figures show.
That time period increases with purchase price.
A buyer paying $1.5 million (the scheme’s maximum purchase price) would be better off opting for the tax unless they intended to stay in the property for 18 years or longer.
Domain’s Chief of Research and Economics, Dr Nicola Powell said the scheme would reduce the amount of time it takes for first-home buyers to enter the market.
“One of the biggest barriers to getting into the property market is the upfront costs of stamp duty and a deposit,” Dr Powell said.
“Removing stamp duty in place of an annual property tax will allow more first-home buyers to purchase sooner.
The other benefit is, based on cumulative property tax, most people across the eastern seaboard could live in a house for at least 15 years before reaching stamp duty costs.”
Dr Powell added there was a risk the new scheme could inflate property values under the $1.5 million price point.
“The scheme does risk inflating property prices under $1.5 million, as those who have already factored in stamp duty costs may put this towards the purchase cost,” she said.
There is a chance that the scheme will be short lived, with the NSW opposition pledging to repeal it if it wins office at the March election.
Instead, Opposition Leader Chris Minns has revealed a $772 million plan to abolish stamp duty for homes under $800,000 and expand concessions to homes worth $1 million.
In addition to the First Home Buyer Choice scheme the NSW government currently offers first-home buyers exemptions for homes under $650,000 and concessions up to $800,000.