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The latest property reforms allowing first-home buyers to opt for an annual land tax instead of stamp duty in New South Wales could potentially trigger a shift to medium-density living.<\/p>\n
BuyersBuyers co-founder Pete Wargent said the move is likely to support unit prices, particularly in Sydney.<\/p>\n
\u201cA full reform of the tax legislation may require federal support, but over time this is likely to drive more buyers towards strata and medium density living, into properties with lower assessed land values, and away from detached housing blocks which will attract a materially higher annual land tax payment,\u201d he said.<\/p>\n
What the stamp duty reform is about<\/h2>\n
The New South Wales state government announced the First Home Buyer Choice initiative, which would provide borrowers with an option to pay an annual land tax for properties of up to $1.5m instead of paying stamp duty upfront.<\/p>\n
First-home buyers who opt into the property tax will pay an annual tax of $400 plus 0.3% of the land value of the property.<\/p>\n
The option will be available starting 16 January 2023.<\/p>\n
Shift towards medium-density living<\/h2>\n
Mr Wargent said first-home buyer activity would likely increase over the coming years, as younger buyers take advantage of the new reforms while at the same time taping the bank of mum-and-dad for assistance.<\/p>\n
\u201cThe reform will likely take some of the stigma away from unit and apartment living,\u201d he said.<\/p>\n
\u201cOver the medium-term, you should expect these reforms to put downward pressure on detached house values in Sydney, but this is likely to be offset by an increase in unit values as demand tilts towards medium-density living.\u201d<\/p>\n
Mr Wargent said one downside of the reform is that land tax is perceived to be a \u201cforever tax\u201d. Still, he thinks axing the stamp duty over time would benefit more buyers and homeowners.<\/p>\n
\u201cReverse mortgages are not popular in Australia, and as stamp duty is phased out fully over time, these changes will encourage more downsizers into favourably located apartments during their retirement years, freeing up housing stock for families,\u201d he said.<\/p>\n
\u201cUltimately, this is the main benefit of the reform, making a more optimal use of the dwelling stock, and encouraging buyers to move into housing that is most appropriate for their needs, rather than worrying about large transaction costs.\u201d<\/p>\n
\u2014<\/p>\n
Photo by @raulpteri on Unsplash<\/em><\/p>\n<\/p><\/div>\n
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