There’s another new state government in New South Wales – and that means another new stamp duty scheme.
On 1 July, the outgoing Liberal government’s First Home Buyer Choice
is expected to be replaced with Labor’s Fresh Start plan, which features lower house price caps but also full exemptions from stamp duty for first-home buyers (FHBs) purchasing homes worth $800,000 or less.
The NSW
stamp duty reform leaves potential FHBs with three choices:
- Buy now and choose First Home Buyer Choice’s stamp duty option
- Buy now and choose First Home Buyer Choice’s annual land tax option
- Wait until 1 July and buy under Fresh Start.
If you’re ready to buy your first home, working out which option suits you best may seem like a daunting task. You’ll need to consider the price of the home, how long you expect to live there, whether it’s a house or a unit, and more. Fortunately, Home Loan Experts has looked at all the possibilities and done the maths for you. Here is our guide for FHBs in NSW as stamp duty reform looms in the state.
The overview
Sorting through all the factors to reach a decision can be complicated, but it is possible to set some guidelines. In general:
- Under $650K purchase price: Buy whenever you like
- $650K-$800K: You’ll pay no stamp duty after 1 July, so best to wait
- $800K-$850K: It’s probably best to wait until July
- $850K-$950K: For a unit, it’s probably best to buy now and choose the NSW property tax. For a house, it may be best to wait. The best option changes, depending on how long you are going to keep the property – if you keep it long enough, you’ll pay more in property tax than you would have in stamp duty – so it’s important to do the maths.
- $950K to $1.5M: It’s almost certainly better to buy now and select the property tax if you expect to keep your home for the average period of time (about 10 years). It may be better to wait if you plan to keep the property forever.
This is complicated – but the savings can be substantial! We recommend that you call us on
1300 889 743 or fill out our free
online assessment form to speak with one of our Home Loan Experts today!
How Long Does The Average Person Keep Their Property?
Most people keep a home for about 11.3 years, if it’s a house, and about 9.6 years if it’s a unit (
source). Ask yourself if you’re buying your forever home or if you’ll need to upgrade or downsize at some point.
The chart below compares:
- Stamp duty if you buy before 1 July 2023 and pay duty up front.
- Buying before 1 July 2023 and choosing the annual property tax option.
- Waiting until 1 July 2023 and the start of the new NSW Labor government’s proposed scheme to buy.
First Home Buyer Choice Vs Fresh Start
| Property Price |
Property Type |
Land Value |
House Value |
Current Stamp Duty |
Property Tax per year |
Breakeven years |
Estimated new stamp duty, after 1 July |
| $800,000 |
House |
$480,000 |
$320,000 |
$31,090 |
$1,840 |
0.00 |
$0 |
| Unit |
$240,000 |
$560,000 |
$31,090 |
$1,120 |
0.00 |
$0 |
| $850,000 |
House |
$510,000 |
$340,000 |
$33,340 |
$1,930 |
2.48 |
$8,335 |
| Unit |
$255,000 |
$595,000 |
$33,340 |
$1,165 |
5.25 |
$8,335 |
| $900,000 |
House |
$540,000 |
$360,000 |
$35,590 |
$2,020 |
6.53 |
$17,795 |
| Unit |
$270,000 |
$630,000 |
$35,590 |
$1,210 |
11.71 |
$17,795 |
| $950,000 |
House |
$570,000 |
$380,000 |
$37,840 |
$2,110 |
10.38 |
$28,380 |
| Unit |
$285,000 |
$665,000 |
$37,840 |
$1,255 |
17.71 |
$28,380 |
| $1,000,000 |
House |
$600,000 |
$400,000 |
$40,090 |
$2,200 |
14.04 |
$40,090 |
| Unit |
$300,000 |
$700,000 |
$40,090 |
$1,300 |
23.26 |
$40,090 |
| $1,100,000 |
House |
$660,000 |
$440,000 |
$44,700 |
$2,380 |
14.40 |
$44,700 |
| Unit |
$330,000 |
$770,000 |
$44,700 |
$1,390 |
23.98 |
$44,700 |
| $1,200,000 |
House |
$720,000 |
$480,000 |
$50,200 |
$2,560 |
14.97 |
$50,200 |
| Unit |
$360,000 |
$840,000 |
$50,200 |
$1,480 |
24.95 |
$50,200 |
| $1,300,000 |
House |
$780,000 |
$520,000 |
$55,700 |
$2,740 |
15.45 |
$55,700 |
| Unit |
$390,000 |
$910,000 |
$55,700 |
$1,570 |
25.78 |
$55,700 |
| $1,400,000 |
House |
$840,000 |
$560,000 |
$61,200 |
$2,920 |
15.86 |
$61,200 |
| Unit |
$420,000 |
$980,000 |
$61,200 |
$1,660 |
26.50 |
$61,200 |
| $1,500,000 |
House |
$900,000 |
$600,000 |
$66,700 |
$3,100 |
16.22 |
$66,700 |
| Unit |
$450,000 |
$1,050,000 |
$66,700 |
$1,750 |
27.13 |
$66,700 |
Note: The analysis in the chart above is based on several assumptions, such as the land value of houses and units as well as details of Labor’s scheme that have not yet been announced. The total cost of property tax or stamp duty for given price ranges will vary depending on how long a homebuyer owns the home. Breakeven time is the number of years it would take someone paying annual property tax to match the cost of paying stamp duty on the same property (assuming 2.5% growth in land value each year, and ignoring time value of money in the annual tax payments).
It is important to seek financial advice before buying a home, as this is a guide only and will not be specific to your personal circumstances.
When using this information to help you make your decision, there are a handful of things you should keep in mind:
- This is only an estimate, as full details of Labor’s first-home buyer stamp duty scheme are not yet known and Parliament has not yet passed the legislation, although that is expected to happen.
- This is complicated. Land values for your property may be different to our examples. Vacant land isn’t covered in these comparisons, new properties may have different concessions, and there are other first-home buyer benefits that can change your costs as well.
- Calculations will be different for houses than for units because NSW property tax is based on the land value – so for units it is often much cheaper than paying stamp duty.
- Consider how long you will keep the property. Is this your forever home? If you keep it for the long term, then the property tax will eventually end up costing you more. The tax also gets adjusted each year, so it will end up costing more in subsequent years than it does in the first year.
- Is deposit size a problem for you? If so, then the property tax may be better, as you won’t need to save as much to buy a home.
- Is borrowing power a problem? Then paying stamp duty will enable you to borrow a little more. It’s not a big difference in most cases.
- The key point is, get advice. There is a limited window of opportunity, but the savings can be massive. For a $1.5 million unit kept for 10 years, the savings from buying before 1 July and choosing to pay annual property tax would be about $49,200. For other property types, it would be less, but still substantial.
We’re Here To Help!
The bottom line is that your situation will dictate the best way for you to handle NSW Stamp Duty reform. If you’re still not sure – or if you’ve made a choice and you’re ready to start your buying journey – call us on
1300 889 743 or fill out our free
online assessment form to speak with one of our Home Loan Experts today!
