25% of first home buyers could buy home 3 years sooner if stamp duty was scrapped

author-avatar By on November 18, 2020
25% of first home buyers could buy home 3 years sooner if stamp duty was scrapped

Photo by Toa Heftiba on Unsplash

New research has revealed first-home buyers could drastically fast track their homeownership plans if stamp duty was abolished.

Gateway Bank surveyed 700 Australians who intend to buy their first property in the next four years and found over 60% would be able to buy a home sooner if they didn't have to pay stamp duty. 

On average, first-home buyers (FHB) could buy a home 20 months sooner, while almost a quarter said it would reduce their homeownership timeframe by three years. 

When asked about the biggest obstacles to purchasing their first property, 32% of FHBs said stamp duty and other fees were too high, ranking this as one of the top three barriers.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

The research comes just a day after the New South Wales (NSW) government announced a proposal to axe stamp duty in favour of a land tax

Gateway Bank Chief Executive Officer Lexi Airey said a smaller yearly amount to pay in tax instead of a large upfront payment would be preferable to most first home buyers. 

“Stamp duty is a significant cost when buying a property, and can add years to the homeownership plans of First Home Buyers," Ms Airey said.

“While the NSW Government is proposing to replace stamp duty with a property tax, many first home buyers would be encouraged by any measure providing full or part relief from this upfront, one-off, cost.”

gatewayfhbs01

Source: Gateway Bank

Ms Airey added axing stamp duty could help FHBs who had experienced financial hardship as a result of COVID enter the property market.

“The proposed move to a new system stands to significantly fast-track the time to homeownership for first home buyers, and when combined with current government schemes, provides a range of support measures for those looking to get their foot on the property ladder.

"This will be particularly welcome news for many Australians who have had to utilise their deposit savings during the COVID-19 pandemic.”

Announced by the NSW Treasurer Dom Perrottet's budget speech yesterday, the proposal is designed to drive a post-COVID recovery. 

Buying a house in Sydney at the median price of $1,154,406 would cost roughly $48,795 in stamp duty. 

Mr Perrottet said axing stamp duty would remove one of the biggest hurdles to homeownership. 

"Stamp duty is a relic from a bygone era when you picked one career, started a family, bought a home and basically settled in for life," Mr Perrottet said.

"It adds tens of thousands of dollars to the cost of the biggest financial commitment most people ever make."


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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