Significant housing affordability
policy initiatives were unveiled by the Victorian government over the weekend. Whilst the announcements have focused on the
impact of these initiatives on first home buyers and the efforts to tackle
housing affordability for these buyers, the proposals contain cause for concern
for Victorian property investors and developers. A proposed stamp duty relief for first home buyers
is packaged up with a selective abolition of the off-the-plan concession aimed
to affect property investors. The lack
of detail that surrounded the announcements of what are set to be significant
changes in Victorian property taxes brings much uncertainty for a range of
other transactions that may be inadvertently caught by the proposed arrangements.
Under the proposal, first home
buyers will see the abolition of stamp duty for purchases up to $600,000 and a
reduction in duty for purchases between $600,000 and $750,000. In
parallel, the availability of the off-the-plan duty concession for property
investors is changing. In a purported
move to "re-balance the market
between investors and home buyers" the off-the-plan concession will
only be available to home buyers who reside in the property as their principal
place of residence or who are eligible for the first home buyer stamp duty
concession. Investors will therefore lose one of the most significant incentives
to purchase off-the-plan.
The proposed abolition of the
off-the-plan concession will have significant impact for Victorian property
developers and existing structuring opportunities for development projects,
potentially bringing real challenges to the established manner of project
financing (which relies on local purchaser pre sales, who are generally
investors and not first home buyers) and impacting the financial viability of
residential projects in the future
The changes are proposed to apply to
contracts entered into from 1 July 2017.
The exact details of the changes are yet to be understood pending
release of the proposed legislation in the near future. The lack of clarity on the details of the
proposed changes brings in question the implications on commercial or other
non-residential developments in Victoria and the impact on investment activity
in this State which has historically been very attractive due to the advantages
of the off-the-plan concession.
The Government announcements also
suggest an introduction of a new tax from 1 January 2018 on dwellings that are
vacant for more than 6 months in a calendar year, with a tax rate of 1% of the
capital improved value of the property.
Watch this space for further details
on these significant developments in Victorian property taxes and how they will
impact the industry and a range of property transactions.