Nicola Powell: Stamp duty initiatives could attract first home buyers to NSW

Conveyance duty, commonly known as stamp duty, is a financial drain on buyers. It is an upfront cost that has to be paid within 90 days of signing the contract in the ACT.

Economists have long debated the inefficiency of stamp duty as a government revenue stream. For many households the high transaction cost of moving home (stamp duty forming a large part) ultimately deters buyer activity.

Let’s put the cost into perspective – a house will incur stamp duty charges to the buyer at $21,165 based on the Canberra median price of $675,000 over the June quarter.

A townhouse purchase will incur a duty of $12,420 based on the current median price of $490,000. Buying a unit at the median of $387,500 will impose a stamp duty charge of $8525.

In 2012 the government began to phase out stamp duty – a process that is expected to take two decades.

A glimmer of hope for entry-level buyers comes in the form of the ACT government home buyer concession scheme. This is an initiative to help buyers access the property ladder by charging a nominal duty of $20 applicable to new homes under $470,000, with a sliding scale up to $607,000.

To take full advantage of the initiative it is important to discover the actual prospects of finding a home under $470,000. Just over one in 10 houses sold in Canberra over the first six months of the year fell below this price point.

It may appear to offer the first home buyer some choice, however, the proportion is distorted by Gungahlin and Tuggeranong where 17 per cent of houses sold below the threshold. Entry-level prospects also exist in Belconnen with 14 per cent of houses sold below $470,000. However, choice is further narrowed considering the eligibility criteria is only applicable to new homes.

• Related: NSW stamp duty concessions lure Canberrans
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• Related: Considerations before buying off the plan

First home buyers who consider a unit will find greater prospects of securing a home, with almost two-thirds sold below $470,000 over the first six months of the year. Mid to high-density developments can offer affordable entry-level market access.

Opportunity knocks for first home buyers who wish to jump the border to greater Queanbeyan. The start of the new financial year saw a suite of measures implemented that are designed to ignite entry-level activity and ease the financial headache of the first leap onto the property ladder.

The NSW government has axed stamp duty on new and established homes up to the value of $650,000 and a sliding scale of concession for homes between $650,000 and $800,000. The new measures will amount to considerable savings and give first home buyers choice. As the policy was announced, entry-level buyers across NSW would have assessed how their personal situation would be affected, both in dollar savings and market access.

The greater Queanbeyan region offers the widest choice with 59 per cent of houses and a staggering 99 per cent of units sold below the $650,000 threshold in the first six months of the year. The concession is applicable to new and established properties giving first home buyers ultimate choice that could result in more Canberrans hopping over the border.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell