First Home Buyers: 5 things to know about VIC’s Stamp Duty Discounts in 2021

For many years, the Australian government has worked with various states and territories to support new home buyers in Melbourne to buy their dream homes. In 2000, the government introduced the first home owner grant scheme, which is popularly known as FHOG. Ever since there has been a push for enhanced homeownership.

Who Is Eligible For The FHOG?

The first homeowner’s grant is a facility that is available for those who purchase new homes or opt to build them by themselves from scratch. The relief is capped at $10,000 within Melbourne and $20,000 for those who choose to build or buy their new homes in the vast Victoria region. There are some eligibility requirements that must be met by new homeowners.

  • The discount is strictly for apartments, townhouses, houses, or any other units valued at not more than $750,000. The unit should not be older than five years and strictly being sold to the first homeowner after its completion. Buyers of investment property or holiday homes are not eligible.
  • Neither you nor your partner or spouse should have been previous beneficiaries of the first homeowners grant in Australia.
  • You must be an Australian citizen aged 18 years or above, or a permanent Australian resident at the time when the home is ready for occupation.
  • You must not have a previous home or residential property ownership in the country, either individually or jointly before July 1st, You however may qualify if either you or your partner/spouse had previous property ownership on or after July 1st,2000 only that you shouldn’t have occupied the property as your home.

One of the most common hindrances to homeownership in Australia is the high cost of stamp duty. In Victoria, first-time homebuyers are exempted from paying stamp duty so long as the property’s value does not exceed $600,000 which translates to a massive $31,000. Buyers can however save on stamp duty for properties valued at between $600,00 and $750,000.

There is a pilot shared equity scheme that allows first home buyers to only pay a 5% deposit for the home while the state government covers up to 25% of the property. They can then borrow up to 70% of the home’s value. In the event that the homeowner decides to sell the home, they can simply refund the 25% owed to the government. The government has restricted the support to singles with an annual income not exceeding $75,000 and $95,000 for couples.

VIC’s Stamp Duty Discounts In 2021

The 2020-2021 Victoria state’s budget had some goodies for potential homeowners, allowing up to 50% discounts on stamp duty. This was geared toward triggering growth and investment in property development. This is a welcome move considering the significant savings first-time homeowners will make. Here are five facts you need to know about the discount.

1. There Is A Difference In Pricing For New And Current Homes.

The 50% stamp duty relief is price capped and has some specific requirements for existing and new homes. Buyers of newly constructed homes valued at not more than $1M can enjoy the 50% relief and a 25% relief for those buying old homes valued at no more than $1M. First-time homeowners purchasing homes valued between $600,000 and $750,000 but do not qualify for the 50% stamp duty exemption but receive concession as per the current grants have a window to combine the same with either the 50% or 25% stamp duty relief.  With facilities such as no deposit home loans, the possibilities of owning homes are higher with such savings.

2. Stamp Duty Discounts End On June 30th!

The seven-month window stamp duty discounts end on June 30th. This might appear like a short period for those who might have felt like taking advantage of the waiver, but it is sufficient if you planned well. It has rejuvenated the housing sector. During these tough economic times, the need to save every coin matters. Experts had feared for inflated prices by home sellers because of the deadline as Australian’s rush to buy homes and save.

3. Has Triggered Increased Budgets For Homes.

As much as the waiver was intended to reduce the initial amount needed by home buyers to purchase their homes, some people have instead opted to increase the prices of their preferred properties to maximise the stamp duty discount in Victoria. This has immensely benefited home sellers because home buyers have more money to spend on their dream properties. On the other hand, responding to increased appetite, more people have opted to sell their homes, increasing their availability. Most finance brokers in Melbourne will encourage you to increase the budget, but it is advisable to stick to your budget no matter how lucrative a deal may sound like.

4. Increased Investment In Real Estate.

The current homeownership in Australia stands at 67%. The real estate industry is expensive to most potential homeowners and mortgages have become expensive. To trigger more investment into real estate, Victoria’s state government believes initiatives such as the first homeowners grant create demand as most people can invest in homeownership with support from the government. While the discounts stand to benefit first-time home buyers, investors also stand to benefit and have most probably pumped more money into new units to make up for the demand.

5. Stamp Duty Vs Land Tax.

There has been substantial discussion regarding making property developers and investors in real estate contribute their fair share to the economy. Some measures have been put in place such as the planned premium stamp duty on transactions exceeding $2 million and 6.5% for values exceeding $2 million that will come into force effective at the beginning of July.

Effective 2022, there are different increases in land taxes that will apply for properties valued at $3 million or $1.8 million. It is important to however note that, in case the property in question is your main residence, then land taxes do not apply. These changes are likely to affect wealthy property owners more than the average homeowner. Those unable to raise the money needed can opt for a guarantor home loan.

Final Thoughts

The cost of housing has been rising over the years, not just in Victoria but the whole country. A study conducted in April placed Melbourne’s median house price at $1 million while regional Victoria exceeded the $500,000 mark. There is absolutely no indication that things are likely to get any better soon.  This is replicated in other cities in the world and potential homeowners can grab and take advantage of any offer they can lay their hands on such as the stamp duty waiver to buy their dream homes.

Something else that has immensely influenced house prices is the COVID-19 pandemic that forced many people to work from home. Finance brokers in Melbourne have reported increased interest in homeownership because the situation has forced most people to rethink their priorities. Renting can be cheaper but owning a home is the ultimate goal for most people. With limited traveling and low-interest rates and financing opportunities, the demand for housing has been on the rise. Investors and property owners have responded by increasing home prices.

These trends are likely to continue. Therefore, it is never too late to talk to a Buyers Advocates to kick off the process of homeownership. People want to permanently shift to their homes to raise their families and even work from home. What is important is to understand the eligibility criteria and apply for grants, home finance and maximise existing concessions.

About the author

Editorial Staff

Add Comment

Click here to post a comment