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First Home Buyer Concessions, Investor Tax Changes & the 2017 Budgets

Sydney’s median house price has just hit a record $1.15m in the March 2017 quarter. Property prices have been spiraling out of control in Sydney over the last 5-6 years. In the last 5 years the median house price in Sydney has nearly doubled in value and is now $300,000 more than a similar property in Melbourne.

The NSW premier, Gladys Berejiklian has said that solving the housing affordability crisis will be her government’s biggest challenge.

 

The growth in property value in conjunction with banks tightening their lending practices since the global financial crisis has made purchasing a first property very difficult or impossible for most first home buyers.

Both the Federal and State Governments have made recent policy changes in an attempt to address some of these issues.

  • In the new financial year – No stamp duty payable in NSW on houses up to $650,000 in value for first home buyers. (previously the limit was $550,000).
  • Discounts on stamp duty up to $800,000 for first home buyers.
  • Abolition of stamp duty charge on lenders mortgage insurance.
  • First home buyer savings are estimated to be nearly $25,000.
  • First home buyers will be able to use voluntary superannuation contributions to reduce tax and build savings for a home deposit.
  • Foreign investor surcharge to increase from 4% to 8% on stamp duty and from 0.27% to 2% on land tax.
  • The federal government is considering a 50% cap on foreign ownership of property developments.
  • In NSW $3 billion dollars has been slated to assist boosting housing supply and accelerate delivery. The Berejiklian government believes that supply is the key to affordability.
  • These measures are coupled with a huge amount of medium and high density housing stock such as high rise units, townhouses and villas hitting the market over the next 1-2 years.

Conversely investors have been hit with tax tightening reforms in the 2017 budget.

  • From July 1st tax exemptions for travelling to investment properties will be scrapped.
  • Depreciation deductions for investment properties will be tightened.
  • Lending practices to investors has been tightened significantly in the last 6 months. Interest rates for investment loans have already been lifted above home owner rates by as much as .4%. Loan to value ratios have also been increased meaning an investor can borrow less relative to the relative to the value of the property.

Time will tell what affect these reforms will have on house affordability, and the housing market more generally.

The RBA has noted that the additional supply of apartments in the eastern states is expected to put downward pressure on prices and rental growth.

The changes to lending practices appears to have already had a slight dampening effect on the market.

The stamp duty discounts for first home buyers certainly are a big incentive for people to get their foot into the market. However those who are waiting for a drop in prices might be disappointed.

Whilst growth is expected to slow over the next year or two, Sydney and Melbourne are predicted to continue to grow in value. Experts suggest there are no immediate signs of an interest rate hike and so is seems likely property values will continue to climb in the major cities of Sydney and Melbourne.