In a surprise announcement, the new stamp duty concession will apply to all off-the-plan buyers from Monday.
Victorian premier Jacinta Allan said the move is designed to cut upfront costs and deliver more homes for renters and buyers across the state.
Currently, only first home buyers and owner occupiers can access stamp duty concessions when they buy off the plan, allowing construction costs to be deducted from the sale price in stamp duty calculations.
These concessions were also capped with thresholds of under $750,000 for first home buyers and $550,000 for owner occupiers.
From Monday, new concessions will be available to all off-the-plan buyers, including foreign purchasers, with the thresholds removed.
However, house and land packages or homes not part of strata subdivisions are not eligible for the new concession.
How much will buyers save?
The amount saved will effectively depend on how much construction has already occurred when the property is purchased.
Stamp duty is calculated on the contract price minus the construction costs incurred on or after the contract date.
The government provided an example of a $620,000 apartment where no construction has started attracting just $4,000 in stamp duty - a $28,000 saving under the new calculation.
Ms Allan said the government is responding to industry feedback that off-the-plan sales have slowed, and it’s been difficult to get new developments underway in the state.
Although Ms Allan cites interest rates as a major contributor, investor interest in the Victorian housing market has fallen off a cliff with the government hiking land taxes on investment properties and introducing stricter residential tenancy laws.
The new stamp duty concessions will also apply to investors.
“We asked the industry what they need to build more homes sooner - and this is what they said,” Ms Allan said.
New centres to boost housing supply
The new stamp duty concessions come just 24 hours after the Victorian government identified 25 areas near Melbourne tram and train stations which will become new high-density development zones.
The so-called “activity centres” will include the construction of taller residential buildings and significantly change the look of many Melbourne suburbs.
The government announced there would be another 25 sites announced by the end of the year.
Mixed responses
The residential construction industry in Victoria has welcomed the move, saying it’s a step in the right direction to boost housing supply.
The Housing Industry Association of Victoria said while it broadly supports the measures, the government needs to ensure its policies support the delivery of all forms of housing and not just high-rise towers.
Property industry analyst CoreLogic also questioned whether high-density unit development in Melbourne would lead to prosperity and wealth-creation for their owners.
It pointed out there was a similar boom in apartments in inner-city areas throughout the 2010s that were largely purchased by investors.
CoreLogic data shows Melbourne unit values remain -8.4% below their record high in 2017 despite the rampant rise in Australian home values since that time.
CoreLogic’s head of research Eliza Owen said in light of the recent moves in housing policy, cheaper homes don’t necessarily make for more homes.
“The contradiction at the heart of our housing challenge right now is that more supply is needed to help housing values come down,” Ms Owen said.
“In reality though, the residential construction sector is still struggling to deliver housing with a reasonable profit margin.”
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