Fury over ‘backwards’ homebuyer change
Leading real estate bodies and experts have rallied against the NSW government’s scrapping of a first-home buyer’s scheme which gives them the choice between paying tens of thousands of dollars in stamp duty or a small annual property tax.
This week, the NSW government will introduce legislation to increase the stamp duty exemption threshold for first-home buyers from $650,000 to $800,000, plus concessions for homes up to $1 million.
In doing so, it will also scrap the former government’s First-Home Buyer’s Choice (FHBC) scheme, which allows pundits to choose between paying stamp duty or a smaller annual land tax on properties up to $1.5m.
Real Estate Buyers Agents Association (REBAA) president Cate Bakos said the FHBC scheme was cut prematurely.
While Ms Bakos said increases to the stamp duty exemption cut off was a “promising” move, there would likely be a lack of properties within that price range.
“Sydney potentially, as the initial test case for this scheme, has not been given a sufficient amount of time to demonstrate its effectiveness,” Ms Bakos told NCA NewsWire.
She said stamp duty was often a key barrier to homeowners selling their properties and said removing the expensive tax would likely increase housing supply and promote a “more fluid market”.
“A considerable number of homeowners currently hesitate to upgrade or downsize their properties due to the burden of stamp duty,” she said.
“One of the key advantages touted by the government was the opportunity for
buyers to have more flexibility when buying their first home, in that they could opt for the annual property tax now and know they had the opportunity to upgrade when the time was right, rather than paying a hefty stamp duty and staying longer than necessary because of the cost burden,” she said.
The NSW government has also stressed the importance of increasing supply into the housing market, with the Premier flagging the need to end urban sprawl into Sydney’s fringe suburbs and increase apartment approvals, which are at their lowest since 2014.
Treasurer Daniel Mookhey reaffirmed on Monday the “ultimate driver of property prices is supply growth (and) the best way in which we can take pressure off housing prices is to make sure we are getting houses built”.
National accounting body CPA Australia said stamp duty was an “inefficient” tax and said there was “widespread agreement among tax experts and professionals” that the lump sum should be replaced with a smaller, annual fee for all home buyers.
“The NSW Government is taking a step backwards by stopping first-home buyers from opting out of stamp duty,” said senior tax policy manager Elinor Kasapidis.
“It’s pleasing to see the stamp duty thresholds increased in NSW, but it’s not enough in the long run.”
Instead, Ms Kasapidis called for a national transition away from stamp duty.
“CPA Australia has been encouraging federal, state and territory governments to discuss stamp duty, GST and payroll tax reform,” she said.
“We need governments across Australia to move towards more efficient taxes. A shift away from stamp duty is overdue.”
Originally sceptical of the scheme, managing director of Sydney-based finance and mortgage broker Pure Finance, Brendan Dixon, said it was especially beneficial for buyers who didn’t have a guarantor.
“There’s a bit inequality with family wealth, and families who can’t help their kids, but the FHBC was a scheme which helped those people and allowed them to access a high budget without having to lean on their parents,” he said.
“That was the only scheme in place which was actually offering anything to buyers who are in the one-million bracket, who let’s be honest, are the bulk of buyers buying in and around Sydney.”
However, he notes that the clause will mean people who plan on turning their first home into an investment property will face a substantially higher annual fee.
Using the example of a $1.1m apartment in Northmead in greater western Sydney, the property would incur an annual land tax of $1515, however the fee would jump to $5587 if it was used as an investment.
“If people buy with the intention to buy the property to rent out as an investment after a few years, there could be quite a rude shock,” said Mr Dixon.
“When we’ve had those conversations with clients, most people haven’t had those plans.”
Aus Property Professional’s founder, and Sydney buyer’s agent Lloyd Edge said the property tax option was “quite popular” among his clients.
“It seemed most buyers really liked what the Perrottet government did and now the government is taking that away,” he said.
“It worked well for first-home buyers who were going to be upgrading in three or four years to have a family or something, and didn’t want to be forking out $40,000 to $50,000 for stamp duty when they could just be paying a yearly cost.”
He’s predicting an influx of first-home buyers attempting to make the June 30 cut off so they can access the scheme.
“It’s potentially going to ramp up the market in that first-home buyers sector up to the financial year,” he said.
NSW Premier Chris Minns said it wasn’t possible for both policies to coexist and believed Labor’s scheme was more fair and balanced.
“You can’t do both schemes,” he told reporters on Monday.
“The parliamentary budget office prior to the election indicated that each scheme costs in excess of $700 million, so we have to make a decision about what is the best targeted assistance for first home buyers.”
While the government will introduce legislation to parliament this week, the Coalition said it will “consider the bill when we see it”.
Shadow treasury spokesperson Damien Tudehope urged the crossbench, who will be instrumental in ensuring the legislation passes, to support the current subsidies.
“They voted for it when the reform went through and the coalition was in government,” he said.
“I’d be saying to them, ‘Come with us on this journey because there is more reform that we should be doing, not less.’”
While Mr Minns wouldn’t say he was “confident” the bill would pass, he said his government has had “great conversations” with the cross bench in both the upper and lower houses.
“I’m confident they’ll look at the existing scheme as it’s currently applied, and what Labor is proposing to do with its alternative plan and say, ‘Ours is better.’”