Changes to First Home Owners Benefits: the NSW Government’s Housing Affordability Package

From 1 July 2017 first home owners have access to a range of benefits as part of a housing affordability package implemented by the NSW Government to increase housing affordability for first home buyers.

Prior to the 2017 State Budget, the NSW Government announced its housing affordability package to help first home buyers get onto the ‘property ladder’. The measures aim to remove or reduce the financial barriers that can prevent first home buyers from affording their own property, such as government stamp duty and lenders mortgage insurance, while assisting them to save for a deposit, which is often several times the average wage.

Over the years there have been numerous financial incentives implemented to assist first home buyers purchase their first home. In its first iteration, the state government scheme offered very generous incentives to first home owners whether they were investing or buying a home to live in. In 2012, the NSW Government revised the incentives to focus on stimulating the building industry by encouraging new home construction; it restricted first home benefits to the purchase of newly built properties that had not been sold before (ie sold to a purchaser by a vendor who bought from a developer but had not finalised the first sale) and vacant land. However, housing affordability has only worsened.

The state government’s current housing affordability package re-introduces financial incentives for first home buyers to purchase both newly-built and existing properties as their primary residence, while retaining its financial measures for all purchasers, new home buyers or otherwise, to purchase a newly-built home. The major change in latest government package is the removal of incentives for investors.

What’s included in the housing affordability package: exemptions and concessions for new and established properties

As from 1 July 2017, first home buyers have access to a range of new incentives and exemptions.

They will now be:

  • exempt from paying stamp duty for new and established properties that are sold for up to $650,000;
  • entitled to stamp duty relief for new and established properties that are sold from $650,000 to $800,000; and
  • no longer be obliged to pay 9% insurance duty on lenders mortgage insurance meaning a saving of $2,900.

With these measures, first home buyers can save $24,740 on the purchase of $650,000 home.

All buyers, first home owner or otherwise, who purchase a new home off the plan they plan to live in will still be entitled to the twelve-month deferral of paying stamp duty. To qualify for this entitlement, purchasers must commence living in the property within twelve months of the issue of a certificate of occupation (not from the date of settlement of the purchase) and do so for a continuous period of six months.

The current exemptions and concessions for vacant land of up to $450,000 are still available.

The First Home Owner Grant

The First Home Owner Grant of $10,000 is

  • now limited to the purchase new homes of up to $600,000 in value; and
  • available for the building of a new home up to $750,000 in value under a home building contract or by an owner builder.

Share equity scheme

As part of the housing affordability package, the NSW Government will also introduce a share equity scheme where a buyer can purchase a property with an approved equity partner. This is aimed at assisting those who are unable to afford a home on their own.

An approved equity partner includes the NSW Land and Housing Corporation, a registered community housing provider and other approved persons. The guidelines on the operation of this scheme are yet to be developed.

The shared equity scheme will apply on eligible transactions where:

  • the equity partner obtains an interest in the home of not more than 80%;
  • the equity partner has the right to share in any capital gains on sale or refinancing but has no right of occupation; and
  • the home buyer can purchase more equity in the property from the equity partner at a price determined under the arrangement between the home buyer and the equity partner.

The first home buyer will also be entitled to duty exemptions or concessions and the first home owner grant and no duty will be payable on subsequent transfers of equity from the equity partner to the home buyer.

 

Ending financial incentives for investors

One of the biggest criticisms that has arisen in recent years, is the competition first home buyers face against investors. As such, financial incentives for investors have ended.

The $5000 New Home Grant Scheme and the entitlement to defer paying stamp duty for twelve months on off the plan purchases are no longer available to investors as from 1 July 2017.

Furthermore, foreign investors will now be obliged to pay higher duties and land taxes when purchasing residential real estate. Foreign investors will now be subject to a surcharge on stamp duty of 8% and a surcharge on land tax from 0.75% to 2.%.

If you have a question about the incentives or need advice regarding purchasing or selling property, contact us today.

 

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