Freedom to move: stamp duty reforms gain momentum

26 Nov 2020 | News, Property

Stamp duty: two of the most dreaded words in the world of property and finance. Fortunately, NSW and Victoria have unveiled some big changes to the inefficient tax this week, and there’s hope it’ll inspire other states to review their own stamp duty arrangements.

If you’re unfamiliar with stamp duty, it’s basically a state/territory government tax you pay on certain transactions, such as a car or piece of real estate.

How much it costs depends on what state you’re buying in, the value of the property you’re buying, and whether you’re eligible for a first home buyer concession.

The problem is that it’s often regarded as an inefficient tax because it requires a large upfront sum (usually tens of thousands of dollars) from home buyers and therefore disincentivises people from buying and selling property.

It particularly tends to restrict young families who want to upgrade from their first home, and downsizers who want to move into a smaller place.

So why does it still exist?

State governments have been slow to overhaul the current system because it’s their biggest source of revenue.

In fact, stamp duty raises about $21 billion a year, including $7.5 billion for NSW and $6 billion for Victoria.

However, with the economy in need of a rebound due to COVID-19, the state governments of NSW and Victoria have made some big stamp duty announcements in their 2020/21 budgets.

NSW has flagged a complete overhaul of the system with a shift towards a property tax, while Victoria has announced short term discounts.

“Reform of the inefficient stamp duty system could create and support thousands of jobs to boost the economy and kick-start our recovery for a prosperous, post-pandemic NSW,” explained NSW Treasurer Dominic Perrottet during the announcement.

And make no mistake: this isn’t just good news for NSW and Victoria.

As the two most populated states in Australia, a move in these property markets may put pressure on other state governments to follow suit sooner rather than later.

Below we’ll outline the announcements in NSW and Victoria, as well as the current state of play around the nation.

New South Wales

The NSW state government will open for public consultation a property tax model that it says will make homeownership more achievable.

NSW Treasury says stamp duty adds $34,000 to the upfront cost of buying the average home, and takes an average 2.5 years to save (compared to one year in 1990).

The consultation will begin with a proposed model that would include giving property purchasers the choice between paying stamp duty upfront or opting to pay an annual property tax.

Victoria

The Victorian government announced it will be waiving 50% of stamp duty on newly-built and off-the-plan homes valued below $1 million.

Existing homes will also be eligible for a 25% stamp duty discount.

The discounts will apply to contracts signed on or after 25 November 2020 and before 1 July 2021.

Elsewhere around the country

The ACT has already started phasing out stamp duty and replacing it with a land tax as part of its 20-year tax reform program.

And in Queensland, the Property Council of Australia says it’s time to review property taxes following NSW’s bold move.

Queensland Treasurer Cameron Dick, however, has ruled out announcing a similar scheme ahead of this year’s state budget on December 1.

In the meantime, most states are offering concessions and exemptions for first home buyers, and some may even follow Victoria’s broader discount waiver over the short term.

Here’s where you can go to find out more about first homeowner concessions and exemptions for NSW, Victoria, Queensland, Western Australia, and Tasmania.

Get in touch

If you’re interested in further exploring some of the stamp duty exemptions, concessions, waivers or discounts, please don’t hesitate to reach out.

Obviously, the less stamp duty you pay, the more of your money you can put towards a home loan deposit.

So for a hand figuring it all out, please get in touch – we’re happy to help you crunch the numbers.

Want to know how much your neighbours paid for their first homes?

19 Nov 2020 | Property

First home buyers wanting to crack into the property market can now use an interactive map to see how much their neighbours spent on average for their first home.

Snoopy snoop! Everyone loves having a bit of a sticky-beak. After all, we’re only human.

And this interactive map, which is being run by the federal government’s NHFIC, allows you to see how much your neighbours spent on average for their first home.

It also shows how much your first-home-buying neighbours generally earn and how much they saved for a deposit.

It then provides a snapshot of the median debt-to-income (DTI) ratio and loan-to-value (LVR) ratio in each local government area across the country, which may seem a little less thrilling, but they’re both very important indicators when applying for finance.

The map is based on statistics from first home buyers who participated in the First Home Loan Deposit Scheme (FHLDS) between 1 January and 30 June 2020.

What’s the First Home Loan Deposit Scheme?

The FHLDS allows eligible first home buyers with only a 5% deposit to purchase a property without paying for lenders mortgage insurance (LMI).

This can save you anywhere between $4,000 and $40,000, depending on the property price and the deposit amount you’ve saved.

There have been two successful runs of the scheme in January and July, when the 10,000 available spots were snatched up within months.

And another 10,000 spots opened up in early November as part of the federal government’s attempts to kick-start the economy following the COVID-19 crisis.

So if you’re keen on nabbing a spot this time around, you’ll want to get in quick!

How to find out more

Check out the interactive map here to see how you compare to your neighbours in your local government area.

If you think you’re in the ballpark of being able to take advantage of the scheme yourself then get in touch with us today.

We can help you run some quick calculations to see whether you’re ready to keep up with the Joneses and purchase a first home of your own.

Australia is building the biggest houses in the world once again

12 Nov 2020 | News

We dream big in Australia. So it’s little surprise that when the Great Australian Dream becomes a reality it means bigger houses than anywhere else in the world, according to a new report.

In 2019/20, the average new house built measured a whopping 236m2, up 2.9% on the year before and the biggest size increase in 11 years.

That’s according to data commissioned by CommSec from the Australian Bureau of Statistics, which shows our houses are now being built bigger than anywhere else in the world.

In fact, we just reclaimed the number one spot from the US, which saw their new house size fall for the fourth consecutive year in 2019 (latest data) to 233m2.

Apartment sizes have grown too, with the average new apartment increasing 6% in the last year to hit a decade high of 137m2.

The jostle for the number 1 spot

It’s important to note that new houses aren’t the biggest they’ve ever been.

That time was 11 years ago, when the average new free-standing house was about 244m2 – then the biggest in the world by far.

Australia relinquished the number one spot to the US a few years later in 2013.

But despite the average new house size shrinking throughout the majority of the 2010s, new houses are still a whopping 27% bigger than they were 30 years ago.

And last year Australian new-builds jumped up in size as US house sizes dipped – putting us back in number one spot.

“Over the past year there appears to have been a perception that Australian homes had shrunk a little too much,” explains CommSec chief economist Craig James.

So what’s next for Australian houses?

There have been numerous shifting trends in terms of house sizes and styles over the past decade, and COVID-19 is sure to throw another element into the mix.

More people could embrace working from home – opting to move away from apartments in, or near, the CBD in preference for larger homes in regional or suburban areas.

Another factor that could increase the size of new homes over the year to come is the federal government’s $25,000 HomeBuilder grant.

The federal government scheme aims to assist owner-occupiers (including first home buyers) who want to buy a new home, or begin work on eligible renovations, by providing them with a $25,000 tax-free grant.

It’s available to people building a new home for less than $750,000, or to those who spend between $150,000 and $750,000 renovating an existing home, subject to an eligibility criteria.

The $25,000 grant has led to a recent surge in new builds and renos, and will no doubt also assist in helping Aussie families build bigger and better new homes.

So if you’re thinking of fulfilling your own Great Australian Dream in the near future, then get in touch today. We’d love to help you make it become a reality.

Switch lenders if rate cut is not passed on: RBA

6 Nov 2020 | Home Loans, Interest Rates, Investor Loans

Mortgage holders and business operators are being encouraged by the RBA to switch lenders if their bank doesn’t pass on the latest cash rate cut.

The Reserve Bank of Australia (RBA) delivered mortgage holders and business operators a Melbourne Cup Day win by cutting the official cash rate by 15 basis points to a new record low of 0.10%.

Better yet, the RBA board says it’s “not expecting to increase the cash rate for at least three years”.

However, there are concerns that not all the banks will pass the rate cut on to borrowers across all of their products.

For example, within 24 hours of the RBA rate cut several of the big banks announced cuts to their fixed rates and business rates, but not their variable rates.

RBA Governor Philip Lowe says if the banks don’t lower their standard variable rates, “ask them for a better deal”.

“And if they don’t give it to you, switch to a bank that will,” Governor Lowe adds.

Federal Treasurer Josh Frydenberg is also urging lenders to pass on the RBA rate cut to reduce the cost of borrowing for households and small businesses.

“It’s my expectation that the banks will now look for ways to pass on those rate cuts. Pass it on to small businesses and pass it on to mortgage holders,” he says.

How we can help you play hardball

Now, here’s the important part.

It’s all well and good for our nation’s leaders to urge the banks to pass rate cuts on to you, but whether or not your lender will actually do so is another matter altogether.

The good news is, the power is with you – the borrower. And we can help you harness that power.

That’s because competition amongst lenders is fierce right now, so if your lender won’t budge, there’s a good chance another lender will.

We’re keeping a keen eye on which lenders are passing the rate cut on to their customers, and which lenders aren’t.

So if you’re keen to explore your options during this time of record-low interest rates, get in touch today.

We’d love to help you pay less interest on your mortgage each month.

RBA Announcement – November 2020

4 Nov 2020 | Interest Rates

Rates Lowered

At its November Board meeting on Tuesday, the Reserve Bank of Australia (RBA) announced that it was cutting the cash rate to 0.10%. A reduction of 15 basis point.

In a statement accompanying the decision, RBA Governor Philip Lowe said:

The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. Given the outlook, the Board is not expecting to increase the cash rate for at least three years.

What that means with regards to the interest rates being offered by our lenders time will tell. However early indication is that it will result in lower fixed rates, but not much change in the variable rates on offer.