Scrapping stamp duty: How much do buyers stand to save?

NSW first home buyers could easily save upwards of $30,000 by saying no to stamp duty, according to new government analysis.

The state’s Treasury has revealed that first home buyers who opt into the NSW First Home Buyer Choice — the scheme that sees home owners pay annual property tax rather than a one-off stamp duty payment — could save money for up to 63 years post-purchase.

Treasury’s calculations showed that under reasonable assumptions, the break-even period between upfront stamp duty and an annual property fee would be 36 years for an $800,000 apartment, 28 years for a $1 million town house, and 26 years for a $1.25 million house.

Across the $800,000 price point, a town house’s break-even point would be 25 years, while a house’s break-even point would be reached at 21 years. 

For $1.5 million units, the break-even period extends out to 63 years. At this price point, the break-even point for a town house would be 36 years, while it would be 29 years for a house. 

With half of all owner-occupiers selling their property within 10.5 years of purchase, and about two-thirds of owner-occupiers selling their properties within 20 years, the government expects the new scheme to be a popular choice for its ability to lower the overall tax payments of first-time buyers.

State Treasurer Matt Kean said the reform, which is set to be debated by the NSW State Parliament over the coming week, “will not only help first home buyers get the keys to their home sooner, but will also result in many first home buyers paying less overall.”

“It is all about choice, and for many first home buyers choosing to make a smaller annual payment will save them money in the long run,” Mr Kean said.

“Most people purchase a home more than once during their lives, so it will make sense for many first home buyers to choose a smaller annual fee for the limited time they spend in their first property, rather than a lump sum of stamp duty.”

Crunching the numbers, the treasurer illustrated: “For example, if they bought a $1 million house and sold it 10 years later, which is around the median period, the annual property payments over the 10 years would total $19,881 in present value terms compared with $40,090 in upfront stamp duty. That’s a saving of $20,209.”

Even with the new scheme in place, the NSW government has reassured would-be buyers that existing first home buyer stamp duty exemptions and concessions for purchases under $800,000 will continue to apply.

Source: Smart Property Investment presented by Grace Ormsby