First home buyers in NSW can now break into the property market faster thanks to a new state government initiative called the ‘First Home Buyer Choice.’ This innovative scheme is part of the broader NSW stamp duty reform aimed at making homeownership more accessible for those entering the property market.
The scheme offers NSW first home buyers the option to choose between paying a large, upfront stamp duty fee or a much smaller, annual property tax when purchasing a home valued up to $1.5 million or vacant land up to $800,000. This choice allows first home buyers to take a step towards homeownership with more flexibility, making it easier to manage their finances.
Opting for the smaller property tax could shave approximately two years off the time first home buyers need to save for a deposit, according to NSW Treasurer Matt Kean. This adjustment under the NSW stamp duty reform aims to reduce the financial burden on young buyers and ease their entry into the market.
“This reform will not only help first home buyers get the keys to their home sooner but will also result in many first home buyers paying less overall,” Mr Kean said, emphasizing the long-term benefits of the change.
“It is all about choice, and for many first home buyers, choosing to make a smaller annual payment will save them money in the long run,” he added. This option gives buyers more control over their finances and the ability to navigate the high costs of purchasing property more easily.
How Much Is the Property Tax Under NSW Stamp Duty Reform?
The annual property tax payments are calculated on the land value of the purchased property as determined by the NSW Valuer General on 1 July each year. It is based on the unimproved value of the land so won’t take into account any renovations or additions to the property itself.
The property tax rates for 2022-23 and 2023-24 will be:
- $400 plus 0.3% of land value for owner-occupied properties
- $1,500 plus 1.1% of land value for investment properties
Existing NSW first home buyer stamp duty exemptions and concessions will still apply. That means if you buy a property valued at:
- Up to $650,000 = you won’t pay stamp duty or the annual tax
- Between $650,000 and $850,000 = you can choose to pay stamp duty at the concessional rate or opt in to the annual property tax
Stamp duty v property tax: which is better?
There isn’t one answer, as everyone’s circumstances are unique.
That said, two-thirds of first home buyers purchasing a home between $800,000 and $1.5 million are expected to choose the smaller annual property fee as it will lower their overall tax payments, according to a NSW Treasury analysis.
Treasury’s modelling shows that first home buyers choosing the annual tax will pay the equivalent of the up-front stamp duty after:
- 29 years for a house valued at $1.5 million
- 32 years for a townhouse valued at $1.25 million
- 43 years for a unit valued at $1 million
By comparison, the median holding time in NSW is only 10 years.
What about investment properties?
To be eligible for the First Home Buyer Choice scheme, you must move into the property within 12 months of purchase and live in it for at least six months.
Following this, you can then rent out the property (as long as you notify Revenue NSW of the change of use).
Want to buy an investment property? High Income Property can help you buy a positively geared property in a location with long-term growth prospects. To discuss your options, schedule an online meeting or (02) 8007 4001