The shifting sands of time. Whatever was old is new again.
Commentary by Jack Brukarz
Removal of off-the-plan stamp duty concessions
For a long as most of us can remember, Victoria has stood out as having the best stamp duty concessions for off the plan property purchases. In a rushed attempt to win favour with its electoral popularity in rapid decline, the Victorian Government has hastily announced a package of tax initiatives designed to address the issue of affordable housing for first home buyers.
First home buyers and others purchasing a property for their principal place of residence, will benefit from zero stamp duty on purchases up to $600,000 with pro rata reductions between $600,000 and $750,000. Purchasers will save approximately $15,000 on a sub $600,000 acquisition.
The existing first home owners’ grants of $10,000 will not be affected.
To compensate for this loss of revenue, concessions for investors buying off the plan will be removed. In other words, the concession will still be available for first home buyers and owner occupiers of residential property only. The new policies will affect contracts of sale entered into from July 1st 2017.
The concern is the effect on the attitude of investors who will now need to pay full stamp duty on all property purchases adding tens of thousands to the price. It seems to me, that often governments tend to pander to the populist view that ‘investors’ are largely comprised of very wealthy property moguls. In fact the vast majority represents a cross section of Australian society with many private investors being simply average Aussies looking to build a nest egg for their retirement.
We know that superannuation contributions and savings will never be sufficient to allow the average retiree to enjoy the fruits of their working life. If not property, where else can one secure one’s long term future? Yes, the share market has its merits and some rightly argue, that it will deliver higher returns than property. However, not everyone has an appetite for the vagaries of the market. Although a balanced investment portfolio is advisable, shares may fail to provide long term certainty and peace of mind.
Moreover, property is the only asset class which offers the option of a high level of leverage. In most cases, a $500,000 acquisition requires a deposit of only $100,000. So growth is leveraged by 400%. In addition, the relative ease of buying property within a self-managed superannuation fund, is a compelling argument not to ignore this opportunity. Many investors have sufficient savings in their retail super fund to enable a property purchase without impacting their day to day financial lives.
The effect of these policy changes cannot be accurately predicted and the market will undoubtedly adapt.
No doubt, amendment will be made over time and I suspect that the concessions may be re-instated with a future change in government. In the meantime, investors contemplating building their portfolio should take action prior to July 1st and enjoy the benefit of the savings the current scenario offers.
Let us hope that this policy decision does not cost us dearly as has many have in the past.
For more information regarding these changes and the effect on your investment strategy, please contact me if you are local on 1300 850730 or if overseas on +61 3 94280244 and on email, [email protected]
Jack Brukarz is the CEO of Motion Property