First home buyers in NSW would be eligible for $25,000 grants under a new plan to help them get onto the property ladder.
The grants would replace current stamp duty concessions available to first home buyers and would allow buyers to choose whether to pay stamp duty or an annual property tax. That tax would be based on the property use and land value.
NSW Treasurer Dominic Perrottet released the results of the public consultation on the plan on Monday. The plan was first revealed in last year’s state budget in a bid to help
“There is widespread support for the proposition that NSW should move away from the existing property tax system, characterised by the large ‘upfront’ cost of stamp duty, towards an alternative system that makes home ownership more accessible, supports household mobility, and better facilitates economic growth and prosperity,” the progress report released by Perrottet read.
First home buyers currently pay partial stamp duty on homes valued above $650,000 and full stamp duty for those above $800,000.
Stamp duty can cost as much as $35,000 in Sydney, with the tax imposing a significant burden on first home buyers trying to enter the market.
Paying an annual land tax under the proposal would cost a homeowner with a $405,600 property around $1,617 annually.
Under the proposal, once a homeowner decided to pay the land tax rather than stamp duty, all following owners of that home would also pay the tax. By 2050, paying stamp duty on properties would be completely phased out.
The state government would also request the Independent Pricing and Regulatory Tribunal monitors residential rents to ensure that costs weren’t passed onto renters.
“The first round of consultation and submissions showed 84 per cent of people believe stamp duty reform is needed and two thirds of the community said stamp duty was a significant barrier to home ownership,” Perrottet said.
The NSW predicts the reforms would boost the state economy by $11 billion over four years as money otherwise spent on stamp duty is funnelled back into the economy.
It also predicts home ownership would increase 6 per cent, or by around 300,000 more NSW residents.
Perrottet said NSW has a “huge challenge” in achieving home ownership for younger people. He noted a new report finding that home ownership among this cohort has dropped from 60 per cent for those born between 1942 and 1951 to 45 per cent for those born between 1982 and 1992.
However, the plan would come at a significant up-front cost: stamp duty raised $8.3 billion in 2020, making up the biggest source of tax revenue in NSW.