Want to know what the two most dreaded words in Real Estate are? “STAMP DUTY”. You’ve persevered past high property prices, you’ve saved the enormous required deposit, fought it out at an auction, and what’s your reward? More Tax! Everyone has heard the saying “The only certainty in life is death and taxes”, but what everybody doesn’t know is that when it comes to stamp duty, it doesn’t have to be the certainty you think it is, and it’s actually possible to save thousands of dollars in this regard.
How to make it easier for first home buyers to enter the property market has been an interesting topic in recent times. The RBA is lowering interest rates so that repayments are more manageable, but the problem that this doesn’t solve is that of collecting enough funds to make the purchase in the first place.
In NSW, there is a first home buyers grant to attempt to ease some of this burden, but with the average house in Sydney costing a cool $1,000,000, the $15,000 this grant provides accounts for just 1.5% of this amount. With this tiny amount of help, potential home buyers will forever be scrounging around for spare change.
Stamp duty on a property costing $1,000,000 would be a little over $40,000, almost three times this grant.
A recent survey has confirmed that the first home buyers grant isn’t all the assistance that is required, as it revealed that many Australians believe a better course of action would be for the government to abolish stamp duty all together.
More than half of the people taking this survey felt this way, with a third suggesting the first home buyers grant should be increased.
I know this would help a lot of people, and I agree with the sentiment that has caused these responses… but doing this is easier said than done.
While the benefits of abolishing this tax may be helpful to some, thanks to Sydney’s most recent house price surge over the last few years, stamp duty now currently accounts for more than 25% of NSW state government revenue.
While the benefits of getting the younger generation into the property market are obvious on a range of levels, including prolonging job creation in the construction industry and keeping pace for available housing with the growing population in major cities, Senior Property Analyst for Stone Invest Paul Loughland suggests that we don’t need to sit around wishing our lives away, as there are already ways to avoid paying stamp duty.
“Stamp Duty does not have to be paid when purchasing new properties in NSW”, Mr Loughland says.
“Because of this sizeable saving, along with the first home buyers grant, we are seeing many young people look towards new property as a possible option.”
To be clear, the first home buyers grant only applies to a property you plan to make your principle place of residence, not an investment. However, despite this, many investors are taking the stamp duty exemption for new properties in NSW, along with all the great tax benefits that are also associated with new property, as opportunities that are just too good to ignore in expanding growth markets.
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This won’t solve all the problems for first home buyers, or those struggling to enter the local markets for an additional property, but what it does do is make the cash flow of a potential investment very attractive, particularly for those who may not have been able to enter the market otherwise.
Stone Invest’s criteria for selecting growth markets that will protect your hip pocket as well as target capital growth has been developed over the past 25 years. To learn more about how we research and identify these markets for our clients please take a look at our 3 part video series now.