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In an environment where governmental decisions get criticised no matter what they do for the housing market, Western Australia’s recent move is something everyone can support. It has extended its successful stamp duty discount and expanded it to accommodate more people.
The stamp duty discount makes it cheaper for buyers to purchase homes and thus encourages them to do so. Increasing demand also makes it possible for developers to build more new homes, further stimulating the WA economy and creating jobs.
One of the standout features of the recently revised plan is the immediate provision of the discount or concession to buyers. They are no longer burdened with paying the entire stamp duty upfront and waiting for a rebate at the time of settlement. Moreover, the inclusion of developments currently under construction in the stamp duty concession greatly amplifies opportunities, particularly for prospective buyers who are undecided.
Considering the current financial environment, the instant savings might expedite the timeline for first home buyers, potentially enabling them to enter the market six to 12 months sooner. With the availability of up to a 75 per cent duty concession on under-construction apartments priced up to $650,000 – exceeding the standard first home concession rate capped at $530,000 – it’s conceivable that a wider range of home buyers, beyond just first home buyers, might consider apartments as their preferred housing choice.
The extension of the stamp duty concession to developments currently under construction also gives buyers more confidence to embark on their home ownership journey. When bricks are already being laid, buyers no longer have to worry through a pre-sale waiting period or wonder when their project will commence.
Downsizers are often especially time-sensitive, so the inclusion of in-progress constructions in the stamp duty concession framework can make life easier for them, too. A surge of downsizers could begin looking for new apartments in the months ahead given that they can now obtain high prices for their family homes.
On the other hand, investors have mixed reactions. All see the obvious financial benefits, but some are concerned that the concession may bring more competing buyers into the market and eventually push prices up. We can be sure that the concession will bring more investors into the market, which may help alleviate the rental shortage.
Who gets the MOST?
Consider this scenario: A first-time buyer opts for a property priced around Perth’s median price of $570,000. Previously, they would be liable for a stamp duty of $21,090. But the 75 per cent concession introduced by this scheme reduces their liability to just $5,272 at settlement. This substantial saving offers a more compelling incentive than the First Home Owner Rate.
Foreign investors will find the same property even more enticing. Their stamp duty nosedives from $60,990 to a mere $15,247, translating to a savings of $45,742. This change benefits investors and promises to bolster the rental inventory.
The increasing in buyer demand means that inventory that is already complete or now under construction will be snapped up more swiftly, particularly within the sub-$650,000 market segment.
This initiative will stimulate and boost property sales and bring new investments to Western Australia. Moreover, the ripple effect of this program could lead to the creation of tens of thousands of jobs within the construction sector.
This program seems like a smart move to me.
Lily Chong is the Perth-based director of IQI WA.
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