Home bonus: Victoria’s first time buyers win stamp duty cuts of up to $23,000

STRUGGLING first-time property buyers will save an average $8000 under changes to stamp duty in Victoria. We reveal full details of the sweeping changes and how they affect the property market.

Alice Ho and Rohan Bahuguna have been house hunting for a month. Picture: Eugene Hyland

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STRUGGLING first-home buyers will save thousands of dollars as part of sweeping stamp duty changes.

From July, the much-hated state property tax will be axed for any first-home buyer in Victoria whose property costs less than $600,000.

There will also be discounts for properties worth between $600,000 and $750,000 — regardless of whether they are new or existing.

Premier Daniel Andrews will announce the cost-of-living package today, saying it will help those who “feel like they are being locked out of the housing market”.

“This will help them get their foot in the door,” Mr Andrews said.

“It means they can put extra money towards what matters most — buying their first home.”

Mr Andrews also moved to allay fears it could fuel further growth in house prices, saying it would create more housing stock and put “downward pressure on prices”.

The dream of owning a home will be more realistic once the stamp duty is abolished. Picture: Jake Nowakowski

The government expects about 25,000 people a year to benefit from the new tax breaks, and says that on average first-home buyers will save an extra $8000.

This would reduce the government’s expected property tax grab in the Budget by $800 million over four years — about the same amount as Victoria’s annual stamp duty take is forecast to grow by 2020.

The biggest winners from the latest concessions will be people who buy for about $650,000 and who would currently cough up $34,000 in fees. From July, this will drop to about $11,000.

At present, Victorians who buy a first home for under $600,000 get a 50 per cent stamp duty discount after changes made by the former Coalition government.

A $10,000 first-home owner grant is also available for anyone who buys a newly constructed property in Melbourne for under $600,000.

On Friday, the government doubled that bonus for regional Victorians.

With all property tax breaks taken into account, the biggest overall winners will be people in the country who buy a newly built home for about $650,000.

They stand to save almost $33,000.

Treasurer Tim Pallas during Question Time. Picture: Tim Carrafa

Rohan Bahuguna, 29, said the dream of owning his own home would be realistic once the stamp duty was abolished.

“That’s $30,000 of your mortgage. It will save a few years on my mortgage repayments and I can use that money to furnish the house,” Mr Bahuguna said.

The Essendon local said stamp duty was one of the “biggest killers” for first-home buyers.

Treasurer Tim Pallas said the reforms being announced today were “important steps towards ensuring today’s families and future generations will be able to afford somewhere to live”.

“The federal government may know how to talk about housing affordability — but this is what real action looks like,” he said.

A booming property market in Victoria has seen the government’s stamp duty rates surge in the past few years, with a whopping $5.7 billion a year now coming from the unpopular tax. In 2013-14, the state’s stamp duty take was $3.5 billion.

Victorian Council of Social Service chief executive Emma King welcomed the cut to the “rotten tax”.

“We have a housing affordability crisis in Victoria, so anything that makes it easier to buy a home is welcome,” she said.

Ms King said stamp duty should be phased out over time in favour of a “broad-based land tax”. Last week, the Opposition suggested extra grants could “feed into higher house prices that won’t benefit first-home buyers”.

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Originally published as Home bonus: Victoria’s first time buyers win stamp duty cuts of up to $23,000