he NSW State Government announced on 6 September 2011 that as of 1 January 2012 stamp duty concessions will only be available to First Home Buyers purchasing a brand new home or vacant land intended to be used as a site for a first home. So purchasers of established properties will no longer receive a stamp duty concession as of 1st January 2012. The action of the Government is viewed as an attempt to stimulate the new home market and therefore the building industry. It must be noted that new homes include substantially renovated homes and vacant land. The changes are part of Treasurer Mike Baird’s 2011/12 budget delivered on Tuesday, 6 September 2011.
The First Home Buyers Grant of $7,000 will continue to apply to eligible purchases of both new and existing homes.
The Good News
The good news is that the above changes are not applicable straight away. For the First Home Buyers who are intending to buy a property in near future there is a window of opportunity to be able to buy an existing property and continue to be eligible to receive the concession. The new rules only apply to contracts entered into on and after 1 January 2012. The existing rules continue to apply until 31 December 2011. It must be noted that as long as the contract of purchase is entered into (i.e. the formal commitment is made to purchase) on or before 31 December 2011 the existing rules will apply.
From the Real Estate market point of view, Mr Phillip Elmowy Said “ we are expecting large numbers of buyers and activity n the coming weeks until 31 December 2011.
What Happens after the 1 January 2012
From 1 January 2012, the stamp duty exemption will only apply to eligible purchases of:
• New homes (that is a home which has not been previously occupied or sold as a place of residence) up to $600,000. This includes apartments and off the plan purchases;
• Substantially renovated homes up to $600,000. Substantial renovations for this purpose are defined as renovations in which all, or substantially all, of a building is removed or replaced; and
• A vacant block of residential land (that is intended to be used as the site of a first home) up to $450,000.
As such, the First Home Buyers will have a difficult choice:
• Buy a new home or substantially renovated home up to $600,000. Provided other eligibility criteria are satisfied, no stamp duty will be paid. However, the cost of new homes or substantially renovated properties may be more than the cost of an existing home;
• Buy a vacant block of land up to $450,000 and then build. Provided other eligibility criteria are satisfied, no stamp duty will be paid. However, choosing this option may cost more than purchasing an existing home; and
• Buy an existing home and pay the stamp duty. To appreciate the difficulty of this choice, the stamp duty on the purchase of an existing home for $450,000 is $15,750. This is a huge cost for First Home Buyers and this will obviously make it harder for buyers to get into the market.
The existing scheme provides savings of up to $17,990 for First Home Buyers. It has been an important concession to assist buyers in the purchase of their first homes. Unfortunately, the significant change in the operation of the scheme from 1 January 2012 will no doubt make it harder for First Home Buyers.
Blog by Condon & Phillip Elmowy [read more]