The NSW government has announced a series of housing affordability initiatives designed to assist first home buyers enter the market including stamp duty relief and taxing foreign investors.

The measures will take effect from 1 July this year. The measures are based on contract exchange dates. Any contracts exchanged prior to 1 July 2017 will not be eligible.

Stamp Duty Relief

For first home buyers, stamp duty will be scrapped on existing homes up to $650,000 and the threshold increased on new homes up to $650,000 with stamp duty relief provided for homes up to $800,000.

These changes are expected to provide savings of up to $24,740 on a $650,000 first home purchase and up to $31,490 on an $800,000 purchase for first home buyers.

Additionally

• Insurance duty on Lenders Mortgage Insurance that is imposed at 9% on the premium will be abolished for all homebuyers. This will save around $2900 on an $800,000 property.
• First home buyers building a new property will be entitled to a $10,000 grant on homes worth up to $750,000.
• First home buyers purchasing a new property worth up to $600,000 will be entitled to a $10,000 grant.
• The $5,000 New Home Grant Scheme, which was available to other buyers including investors, will be closed.
• No longer will investors be able to take advantage of the 12-month deferral of duty for residential off-the-plan purchases. Any buyers who are purchasing a home they plan to live in off-the-plan will still be entitled to a 12-month delay in the payment of stamp duty, deferring payment from three to 15 months after settlement.

Taxing Foreign Investors

Meanwhile, foreign investors will pay double the surcharge when they purchase residential real estate. The surcharge on stamp duty for foreign buyers will double from 4% to 8% and the surcharge on land tax will increase from 0.75% to 2%. Foreign developers will be exempt from the increased surcharges.

Glenn Stevens

These housing affordability initiatives have been introduced despite the former Reserve Bank governor Glenn Stevens expressing concerns for demand side support for first home buyers warning against “self-defeating” subsidies that could inflate house prices. Mr Stevens suggested the focus should be on supply side measures to lead to the availability of lower cost supply of new housing

Supply side measures

The NSW government plans to commit $3 billion to boost and accelerate the delivery of housing supply and infrastructure including roads and community spaces across the greater Sydney area.

More information can be found on the NSW Government website.