Home Money Home Loan Recent changes to NSW stamp duty to help first home buyers.

Recent changes to NSW stamp duty to help first home buyers.

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Great news for first home buyers

In my opinion, your first home is always the most difficult to buy because you need to save up every hard-earned penny to be able to fund the initial costs, which are mainly the deposit and stamp duty in most cases.

There is great news for first home buyers!

Government temporary boost

In July 2020, the NSW government announced a temporary boost that allows first home buyers to have an increased threshold for stamp duty concessions. The increased thresholds mean that the first home buyers who are buying newly built homes or vacant piece of land are able to pay less or none stamp duty at all.

Prior to the exemption, an established home costing $750,000 would attract $29,000 stamp duty. If eligible for the exemption, stamp duty will be nil.

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While the changes are good news for many, the thresholds and eligibility criteria are specific and do not apply to everyone.

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Below is the breakdown of who will benefit from these changes to stamp duty, and illustration on how the stamp duty changes will work with other government schemes to provide significant savings for first home buyers who meet all the criteria requirements.

NSW stamp duty changes

Since August 1, 2020, the NSW government is not charging stamp duty to first home buyers purchasing a brand-new home valued at $800,000 or less. There are concessions or discounts on stamp duty that apply on new properties that are valued up to $1 million.

This increase is above the previous threshold of $640,000, which now apply to first home buyers buying existing homes.

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Rules for first time land purchases have been changed too. Buyers purchasing vacant land, the exemption threshold for stamp duty increased from $350,000 to $400,000. Above that, there are stamp duty discounts up to land valued at $500,000.

The government announced that these changes are temporary and are due to expire after 12 months.

Who is benefiting from these changes?

The changes are obviously benefiting first home buyers, especially those that are buying off the plan. It means that some buyers can now afford more expensive property than prior to the changes. If for example you bought a new property for $750,000 before changes, then you would have paid approximately $29,000 in stamp duty.

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Who is missing out on these changes?

First home buyers that are buying existing properties will not maximise on the changes. For purchase of existing homes, the stamp duty exemption is only up to $650,000.

Given that the median Sydney property in Sydney as of July 2020 is around $1,143 million (according to Smart Property Investment), then quite a number of first home buyers will miss out., especially in the more expensive parts of the state.

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Additional assistance for first home buyers

There are some additional government schemes that are still available, even if you don’t qualify for the stamp duty savings.

If you are a first home buyer in NSW and in most states, you will qualify for the First Home Owner Grant (FHOG). In NSW, you can qualify for $10,000 FHOG if you purchase a property worth up to $600,000. This is an existing government scheme support that has already been there and it will not be affected by the stamp duty changes.

Nationally across Australia, the First Home Loan Deposit Scheme offers a limited number of buyers the chance to buy a property with just a 5% deposit while avoiding lenders mortgage insurance (LMI).

If you were a new first home buyer in NSW valued at $700,000 (the price threshold for the deposit scheme) you could potentially get it with just a 5% deposit, borrow the rest with a low deposit home loan, avoid stamp duty completely and also avoid the costly LMI cost.

This will be a significant saving in the tens of thousands if all savings from stamp duty and LMI costs are added together.

There is also the new federal HomeBuilder grant which provides eligible builders of new homes a $25,000 cash grant.

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This grant is available to newly built homes valued up to $750,000 and is there to complement the other schemes. If you meet the income threshold and all other criteria, you could potentially receive $10,000 FHOG, $25,000 HomeBuilder grant and at the same time not paying stamp duty.

I encourage you to check for any government incentives, concessions, exemptions and grants that are available in your state or territory. You could potentially save thousands of dollars or even receive some much needed cash which will be useful towards your first home purchase.

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I am passionate about helping individuals create wealth through property investments. I am the co-founder, mentor and financial writer at WatuDaily, specialising in property investment, business advice and personal money matters. I was previously a financial adviser for over 15 years and it is on that high that I wish to share my knowledge and experiences and channel them towards a vision and purpose of helping others to realise and achieve their financial goals through my publications. As a financial adviser, I won a number of industry awards for the outstanding contribution I made to my clients and peers. I hold a Bachelor of Applied Finance degree and a Master of Commerce in Accounting and Finance degree. In my spare time, I enjoy travelling and staying active through playing sport.