Having recently purchased my first home in regional Victoria, I understand better than most just how difficult it is for Victorian first home buyers to break into the property market.
The Victorian Government has recently announced significant changes to the First Home Owner Grant Scheme and the stamp duty concessions applicable to first home owners. In an initiative to improve property affordability for first home buyers and to encourage regional development, first home owners in regional areas now have significantly more generous benefits available to them. Below is a summary of the changes:
First Home Owner Grant
For contracts signed from 1 July 2017, the First Home Owner Grant will double for regional new home construction or purchase from the current $10,000 to $20,000. A few important considerations to note are:
- The date that you sign your contract is the critical factor in determining whether you’re eligible for the $20,000 grant or the existing $10,000. If you’re intending to build on vacant land, the relevant contract is your building contract, not the contract to buy the land. Accordingly, you can sign a contract to purchase your land now and you’ll still get the $20,000 grant so long as you do not sign a contract to build your new home until after 1 July 2017
- The doubled grant applies to regional areas only, which essentially includes any area outside of metropolitan Melbourne, but includes larger regional centres such as Bendigo and Geelong
- The grant is available only to eligible first home buyers. If you or your partner have received the grant before, owned property in Australia before 1 July 2000 or lived for more than 6 months in a property in Australia which you wholly or partly owned after 1 July 2000, you are not eligible
- The grant is only available for newly constructed homes valued up to $750,000. That is, on the construction of a new home, or the purchase of a brand new home that has never been used as a residence. The grant is no longer available on the purchase of existing homes, however, there are stamp duty savings available in such cases
Abolition of stamp duty for first home buyers
Currently, eligible first home buyers purchasing new or existing homes are eligible for a 50% reduction in stamp duty on their purchase. However, from 1 July 2017, first home buyers purchasing properties valued below $600,000 will be exempt from paying any stamp duty. A concession applies on a sliding scale for properties valued between $600,000 and $750,000.
In practical terms, if you’re an eligible first home buyer buying an existing home valued at $400,000, and you sign your contract after 1 July 2017, you would save $8,185 on stamp duty (being the amount of stamp duty with the current 50% concession applied). If instead you chose to build and your house and land package costs $400,000, you would save $8,185 on stamp duty and receive the $20,000 grant.
As with the grant, it’s all about the timing. As stamp duty obligations arise upon the transfer of land (and buildings), the date that you sign your land contract is critical. First home buyers wanting to take advantage of the doubled grant and be exempt from stamp duty will need to wait until after 1 July 2017 to sign contracts for both land and building.
If you are a first home buyer, we can help to simplify the process of buying your first property and to help you take advantage of these savings. Please contact our Property team to make an appointment.