Big changes to government handouts for property

The Victorian Government recently announced its intentions to make significant changes to the First Home Owner Grant (FHOG) and stamp duty for first home buyers, taking effect from 1 July 2017.

Stamp duty

Subject to the requirements below, first home buyers who enter into a contract of sale from 1 July 2017 will obtain:

  1. An exemption on stamp duty if the property is valued up to and including $600,000, or
  2. A concession on stamp duty applied on a sliding scale if the property is valued between $600,001 and $750,000.

To qualify for the exemption or the concession, the following requirements must be met:

  • The dutiable value (see below) of the property must be $600,000 or less for the exemption, or between $600,001 to $750,000 for the concession
  • The purchaser (who must be a natural person over the age of 18 years), and the purchaser’s partner (if applicable) must both be first home buyers
  • The purchaser must be an Australian citizen or permanent resident
  • The property purchased must be used as the purchaser’s principal place of residence for a continuous (ie. non-interrupted) period of 12 months, commencing within 12 months of possession of the purchased property.

The dutiable value of a property is generally determined by the greater of the purchase price or the market value less any deductions (eg. off-the-plan concessions).

The exemption or concession applies to new and established homes. An example of the changes are reflected in the below table.

 

Legal article table

 

According to the Real Estate Institute of Victoria (REIV), in recent years the Victorian median house prices have increased, with the median house price in metropolitan Melbourne recently hitting a record high of $770,000. The story is different in regional Victoria where the median house price is $358,000. The REIV has also found that the median apartment price in metropolitan Melbourne is $563,500 and in regional Victoria it is $269,000.

This suggests that the stamp duty exemption/concession is likely to be more relevant for those looking to either purchase their first home in regional Victoria or an apartment.

FHOG increases targeting regional Victoria

Metropolitan Melbourne has historically been more attractive for first home buyers given the greater opportunities to obtain graduate employment. The State Government is looking at ways to help regional first home buyers purchase in their local community and help support construction and employment in regional areas.

One incentive by the Andrews Government to help increase the number of homes being built in regional Victoria by first home owners is to increase the FHOG to $20,000 for homes built in certain regional council areas and valued up to $750,000.

See the council catchment areas on the map below. All properties in Victoria, except those located in the councils marked with a red cross, representing the metropolitan Melbourne area and the catchment area of Cardinia Shire Council, will be eligible for the grant.

Just like the stamp duty exemption/concession, in order for the purchaser to be eligible for the increased grant, the purchaser (who must be a natural person over the age of 18 years) and the purchaser’s partner must be first home buyers, and the property purchased must be the purchaser’s primary place of residence for a continuous period of 12 months, commencing within 12 months of possession of the purchased property.

This increased FHOG is to apply to contracts of sale signed between 1 July 2017 and 30 June 2020 (inclusive). The FHOG for first home buyers of new homes in metropolitan Melbourne and Cardinia Shire Council will continue to receive the $10,000 FHOG.

The FHOG coupled with the stamp duty exemption/concession are expected to benefit around 25,000 first home buyers and enable them to contribute more towards the equity of their home and reduce their mortgage payments.

 

Legal article map

 

 

 

Financing your first home

Various news sources have commented on the difficulties faced by first home buyers trying to save a deposit. The disparity between the average income and an average first home buyer loan has continued to increase in recent times. Further complicating factors include that first home buyers need stable employment in order to service loans, and need to reduce their living costs in order to save that deposit.

Summary

If you or someone you know is at a stage in their lives where they are contemplating purchasing their first home or apartment, these incentives may help.  It is anticipated that these incentives will be passed by the State Government shortly and we will keep you updated on developments.

Partners Legal can assist in applying for both the stamp duty exemption or concession, as well as the FHOG. We offer competitive pricing and can provide legal assistance from pre-contractual advice to handling the broader conveyance up to settlement. Our Partners Lending team can also assist in obtaining finance for property purchases.

To speak with our conveyancing team or one of our lending specialists, please call us today on (03) 8508 7800.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.