One of the biggest costs when buying property, besides the actual property itself is the overinflated costs of stamp duty
, particularly in NSW.
Property prices in Sydney are already extremely expensive and that’s before you add on the cost of stamp duty.
The median dwelling price in Sydney according to latest figures from CoreLogic now sits at $845,000 with the median house price at a whopping $990,000 and units at $715,000. So, the stamp duty on a $990,000 house would be around $40,000, whilst on a $715,000 unit, buyers would have to pay $27,665 in stamp duty.
With a 10% deposit, legal fees, stamp duty, transfer fee and mortgage registration fee, you are already looking at over $100,000 just to buy a $715,000 unit in Sydney, which is absurd, and there are still costs on top of that to consider such as insurance, LMI, moving costs and pest inspections. No wonder Sydney buyers are struggling to enter the property market, particular first home buyers, who quite frankly, stand little chance at becoming an owner occupier anytime soon.
In comparison, a $715,000 unit in QLD would involve $18,025 in stamp duty, whilst in VIC, buyers would face an extortionate $37,970 in stamp duty. Keep in mind though that property prices in QLD and VIC are much lower here compared to Sydney so stamp duty would not be as much.
With stamp duty
so high, people simply cannot afford to move which is adding to the pressure on the already exorbitant property prices. It actually works out cheaper to just stay put in your current house (if you’re lucky enough to own one!) and bring it up to modern day living through renovation.
Stamp duty has a major impact on property price growth in NSW. With higher stamp duty, this means there are fewer available listings and less transactions occurring, as less people are willing to pay the exorbitant fees to buy a new home. This has an effect on buyers as well as household good suppliers, and homewares retailers who are seeing less people furnishing their new homes.
NSW is also facing a housing supply shortage, particularly within Sydney which isn’t helping the problem. Data from CoreLogic RP Data also reveals that the amount of new stock being added to the market is substantially lower than the past two years.
Compared to a year ago, the total advertised stock levels are 10.2% lower, with approximately half as many advertised properties on the market compared to the peak in 2011 which saw over 40,000 properties on the market.
Stamp duty also has an effect on employment opportunities, as with less property transactions occurring, it’s impossible for real estate companies to employ more staff.
Stamp duty acts as a short term revenue booster, but over the long term the consequences are disastrous. Not only does stamp duty have an impact on the housing affordability and property prices that are already spiralling out of control, but it also stops new stock being added to the market and being absorbed.
The NSW Government had already made a surplus of $4 billion through stamp duty; however, the state’s reliance on stamp duty is to the detriment of NSW families trying to buy a home says Jane Fitzgerald, Property Council of Australia NSW Executive Director.
“This budget update encapsulates the worst of stamp duty – it keeps house prices high while reducing market mobility in a softening market,” she said.
“If the NSW stopped its reliance on stamp duty and instead looked at other ways to raise revenue, then house prices would come down and affordability would improve.”
How can you reduce stamp duty?
So what can you do to reduce the amount of stamp duty you pay on a property? There are a few things you can consider. 1) Buy a cheaper home
As stamp duty is significantly greater in most states on properties valued at $500,000 or more, you can save on stamp duty by simply purchasing a cheaper property. However, this is easier said than done in Sydney with the median unit price at $715,000. 2) First home owner
If you are a first home owner then you might be eligible for stamp duty exemptions. In NSW, eligible purchasers will be exempt from duty on new homes valued up to $500,000 and will receive concessions for new homes valued between $500,000 and $600,000. Talk to iBuyNew about the possibility of finding new off the plan properties less than $600,000 in Sydney – there are still some options available. 3) Buy interstate
If you are an investor, then it makes sense to invest interstate, where stamp duty is far lower such as in Queensland. Properties here are also more affordable and if you buy a new home, you could also be eligible for stamp duty savings.
Just remember that stamp duty is in addition to the cost of buying a property, so it is important to factor this cost into your budget when searching for new property.
To learn more about stamp duty and see if you are eligible for stamp duty savings, why not call iBuyNew today. You can speak directly with one of our friendly Property Consultants who can help you further and work out how much stamp duty you might have to pay. Simply call us on 1300 123 463
To learn more about stamp duty, make sure you read our helpful article: "A Simple Guide to Stamp Duty for Properties."
Published on 7th of February 2017 by Marty Stanowich