NSW stamp duty reform is limited: PropTrack

The NSW budget, released on Tuesday (21 June), confirmed that the state will allow first home buyers to opt for an annual land tax instead of paying stamp duty on property purchases up to a value of $1.5 million from 2023.

While Cameron Kusher, director of economic research at PropTrack, called the move an encouraging shift away from stamp duty, he noted a number of shortcomings, including that the scheme will only target new entrants to the property market, or the “smallest cohort of buyers”.

“The focus that NSW and other state governments have on stamp duty waivers or reductions is an indication that stamp duty is a barrier to market entry for first home buyers,” Mr Kusher said.

“It is also a barrier to market mobility for existing homeowners. Given the new scheme is an option for homes up to the value of $1.5 million, there is an opportunity to extend this to subsequent purchasers and investors too.

“Higher priced properties being excluded from the scheme would reduce the loss of revenue to the government and those buyers are probably more likely to choose to pay stamp duty rather than a land tax anyway.”

He also believes that as higher-priced properties are copping the largest hits amid the house price slowdown in NSW, the stamp duty reform will have a limited impact on the market.

“A scheme such as this is likely to provide some more support for cheaper properties, however, the impact is likely to be fairly minimal given the stronger market forces at play and the further increases in interest rates which are expected,” Mr Kusher said.

The NSW government has also updated the reform from its previous form last week, now tying the choice to pay land tax to the buyer, rather than the property and thus all subsequent buyers.

Mr Kusher called the change a “limitation” for the scheme.

But he did note that the land tax option is available to buyers of both new and existing homes, in contrast to the already existing stamp duty exemption and reduction schemes, which only applied to new homes.

“Hopefully this is the first step to broader stamp duty reform in NSW,” Mr Kusher said.

Meanwhile Megan Keleher, chief customer officer at Great Southern Bank, welcomed the reform, saying it would help improve accessibility and affordability for rookie home buyers.

“Giving first homebuyers more choice around whether to pay upfront stamp duty or a deferred land tax – particularly those purchasing a home from $800,000 up to $1.5 million – provides homebuyers more options to make that first step on to the property ladder more attainable,” Ms Keheler said.

She also expressed support for the state government’s new $780.4 million shared equity scheme, which it will trial from 2023.

The program, which is targeting key workers (teachers, police or nurses), as well as single parents and singles aged over 50, will see the government contribute a share of up to 40 per cent for a new property or 30 per cent of an existing property.

Buyers will only need to have a deposit of at least 2 per cent of the property price and they will be able to skip lenders mortgage insurance.

“Great Southern Bank has been a strong advocate of shared equity for a number of years, helping many Victorians to buy a home through a similar scheme,” Ms Keheler said.

“We look forward to seeing more details of the NSW scheme.”

The state budget has also outlined plans to invest $500 million into increasing housing supply.

Around $300 million has been allocated to building new dwellings across Sydney and some regional areas.

A further $89 million has been slotted to speeding up planning assessments, with $3.8 million for a dedicated team, as well as $69.8 million for accelerating the rezoning of key precincts across Sydney and the rest of the state.

The Property Council of Australia welcomed the commitments, with NSW executive director Luke Achterstraat saying the measures across supply, stamp duty and shared equity indicated housing was at the front of the state’s agenda.

“There is no doubt we are experiencing a housing supply crisis in NSW which is putting a strain on affordability, both in terms of ownership and rentals,” he said.

“Improving the planning system and delivering more housing supply are the biggest levers the state government has to address affordability.

“We are some 100,000 homes short of where we need to be in NSW so it is timely to support the private sector in getting on with the job of building quality homes and beautiful communities for the people of NSW.”

Several players have called on other states to emulate NSW"s property tax scheme, with the Real Estate Institute of Queensland (REIQ) expressing disappointment that the 2022-23 Queensland State Government budget did not include such a change. 

REIQ CEO Antonia Mercorella said this year’s budget had "missed a valuable opportunity" to implement key reforms and bring forward creative solutions to assist Queenslanders towards home ownership. 

“Stamp duty significantly hinders home ownership, discourages housing turnover, and restricts mobility, and it’s abolishment would open doors in Queensland for many,” she said. 

“That’s why we’ve long advocated for a 10-year phase-out program and eventual abolishment of stamp duty by first introducing stamp duty exemptions allowing older Queenslanders to ‘rightsize’ into more suitable homes, and ultimately, replacing stamp duty with a broad-based land tax. 

“The Henry Tax Review, delivered over a decade ago, identified it as a “bad tax” and yet it remains with us with today with not even a whiff of a plan for stamp duty reform on the horizon.”  

Ms Mercorella also called on the QLD government to expand its first home owners's grant to existing housing - as well as new construction.

“Despite a construction sector in crisis, and the government itself conceding that builders and building supplies are rare as hens’ teeth, the First Home Owners’ Grant continues to overlook established housing, remaining restricted to new construction,” Ms Mercorella said. 

“With rising construction costs and financial entry barriers making building or purchasing a brand-new home is simply unfeasible for many first home buyers, surely, it’s time to extend this initiative to established housing options. 

“In addition, given that we are in the throes of a rental crisis, support measures should be going further to help more renters transition into home ownership by providing some upfront financial assistance and opening up access and choice to include established housing.” 

[Related: NSW FHBs to choose how they pay stamp duty from 2023]

Sarah Simpkins is the news editor across Mortgage Business and The Adviser.

Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.

You can contact her on This email address is being protected from spambots. You need JavaScript enabled to view it..