Homes for Victorians … how will the market react?
By Brett Marshall, Partner, Fordham Business Advisors
Daniel Andrews and the Victorian Government recently announced a housing affordability package that will have an array of social and economic repercussions for the property market in Victoria.
First home buyers
From 1 July 2017, stamp duty for first home buyers of both new and established homes under $600,000 will be abolished. For homes acquired between $600,000 and $750,000 there will be a sliding scale concession available. The reforms reduce large upfront costs for first home buyers allowing them to participate in a rapidly rising and strongly competitive housing market.
- Duty for first home buyers previously $15,535
- Duty from 1 July 2017 for first home buyers $0
- Stamp duty saving $15,535
- Duty for first home buyers previously $34,070
- Duty from 1 July 2017 for first home buyers $11,357
- Stamp duty saving $22,713
- Duty for first home buyers previously $37,070
- Duty from 1 July 2017 for first home buyers $24,713
- Stamp duty saving $12,357
The Victorian Government also announced for first home buyers, an increase in the First Home Owners Grant (FOHG) from $10,000 to $20,000 when building a new home. The grant is designed as an economic and social stimulant for regional areas, making what is already an attractive decision for young people to migrate from city hubs, even easier.
David Sowerby, Development Director for the Seebeck Group, developers of regional communities in the Gippsland areas of Drouin and Warragul, commented as follows:
“The measures are a welcome step in the right direction, as it creates a generation of young, willing aspirational people to establish their lives and careers for the long term in regional areas.”
With both concessions applicable to acquisitions with a contract date of 1 July or later, it will be interesting to track the impact of sales on developments that are currently on the market.
A further welcome initiative, HomesVic, has been introduced to assist those that are currently outpriced and unable to enter the housing market. From 1 January 2018, HomesVic will allow first home owners to apply to the Government to take a share of their home purchase, up to 25%, in order to assist with financing their acquisition. The program aims to reduce the overall deposit required by first home buyers (buyers must have a 5% deposit), and is available for couples earning up to $95,000 and singles up to $75,000. Once the homeowner sells the property, HomesVic will recover their share of the equity.
Furthermore, Buy Assist is another new Government program that aims to deliver an additional 100 social housing dwellings to help medium income households in the property market.
Other changes for investors and property developers
The Government has initiated a significant change to the off-the-plan stamp duty concession that has previously been available to both home owners and investors. This concession is now only available for first home buyers who can access the stamp duty concession or those who will use the property as their principal place of residence. This new rebalancing of stamp duty will mean that investors can no longer access the concessions for contracts signed after 1 July 2017.
These changes may have widespread ramifications for the apartment market in Melbourne, by softening local investment interest and shorting a subsequent supply of apartment completions into the market. Inversely, the changes could bolster activity developers of Greenfield sites, with local investors seeking alternative investment opportunities.
The Government also announced a further 17 Precinct Structure Plan’s (PSP’s) to be released under the Streamlining for Growth Program. These new suburbs will boost land supply and will rezone approximately 100,000 lots for residential purposes by December 2018. In further positive news for Greenfield property developers, the program aims to help councils achieve a streamlined subdivision process, speedier application approvals, and further sites becoming unlocked.
Other changes for home owners
Addtionally, the Victorian Government has introduced a tax on residential properties in the inner and middle areas of Melbourne that are left vacant for more than six months in a calendar year from 1 January 2018. The Vacant Residential Property Tax (VRPT) is a 1 percent tax on the capital improved value of the unoccupied property and is an attempt by the Government to help motivate homeowners to either put their house up for rent, or to sell. This measure seeks to encourage an increase of the supply of housing in Melbourne, and to address affordability issues for home buyers. Exemptions are available for holiday homes, properties used for work purposes, deceased estates, and for those Victorians who may be temporarily living overseas.
Should you require any further advice surrounding the Government’s announcement and how these changes may affect you, please contact your Fordham Partner.
Download Property Alert-Victorian property market set for shake up-March 2017
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