This article is from the Australian Property Journal archive
LOOKING to define itself on housing policy, Victoria’s Allan government will slash stamp duty on off-the-plan apartments, units and townhouses in a bid to attract demand to higher-density housing, a day after unveiling a plan to turbocharge supply across 50 suburbs.
The announcements are in tandem with its ambitious Housing Statement, released a year ago, which aims for the delivery of 800,000 homes over a decade – while also fulfilling obligations as part of the National Housing According and Housing Australia Future Fund. They also follow an initial announcement in August of 10 Activity Centres where the state government will encourage apartment buildings of up to 20 storeys around transport hubs, and low and medium-density developments within 800 metres of train stations.
It said yesterday’s stamp duty concession announcement would “cut upfront costs, speed up building, and make it more affordable for everyone to buy off-the-plan”.
Premier Jacinta Allan was in North Fitzroy to trumpet the one-year stimulus, which will allow anyone buying an apartment, unit or townhouse off-the-plan to claim the concession – a 100% deduction of outstanding construction and refurbishment costs when determining how much stamp duty is owed.
Currently, first home buyers and owner-occupiers can access a stamp duty concession when they buy off-the-plan, allowing construction costs to be deducted from the sale price when calculating how much stamp duty they owe. The reduced value for stamp duty calculations following the deduction of construction costs must be under thresholds of $750,000 for first home buyers and $550,000 for owner occupiers.
Thresholds will be removed so the concession is available for apartments, units and townhouses of any value.
The savings depends on how much construction has occurred. Generally, someone buying an apartment off-the-plan is likely to pay about a quarter of the stamp duty they would pay without the off-the-plan concession. Using the new concession, buying off-the-plan before any construction work starts could slash stamp duty by around $28,000 on a $620,000 apartment – with duty slashed from around $32,000 to around $4,000.
“We asked industry what they need to build more homes sooner – and this is what they said,” Premier Allan said.
“More apartments and townhouses getting built means more homes for young people and families to rent or buy.”
Melbourne’s rental market is witnessing a crushingly low vacancy of 1.67%, according to the latest PropTrack data. Only 2,100 apartments were launched for sale to the market in FY24, according to Charter Keck Cramer – the lowest number of launches in more than 15 years. Commencements decreased for the sixth consecutive year, at just 3,400 apartments. This is also the lowest number of apartment commencements recorded in more than 15 years , and represents an 86% plunge from the peak levels recorded during FY2015, when there were 24,300 starts.
Units must be in a strata subdivision to be eligible. House and land packages or other dwellings that are not part of a strata subdivision are not eligible for the extended concession, but first home buyers and owner occupiers can still utilise the existing concession on these properties. The existing concession will continue to apply during and after this 12-month extension.
CoreLogic’s head of research, Eliza Owen said historic lending data from the Australian Bureau of Statistics show the biggest surges in first home buyer activity have occurred during temporary, uncapped buyer concessions, because they concentrate first home buyer activity under the period the concession is available. These included the temporary boost to the First Home Owners Grant in 2008 and 2009, and the HomeBuilder scheme, which was available to all buyers but had strong take up from first home buyers.
“This actually does serve to improve the feasibility of unit projects in the areas earmarked for upzoning. Even without the stamp duty concession, younger Australians would likely be incentivised to take up unit living because of the cost blow-out between houses and units through the pandemic,” Owen said.
The Real Estate Institute of Victoria (REIV) welcomed the stamp duty concessions.
“We’re pleased the Allan government is introducing tax concession measures that seek to incentivise private investment in Victoria’s housing ecosystem,” said REIV CEO Kelly Ryan.
“While we recognise this is a first step, our hope is that these concessions will not only help stimulate development of urgently needed higher density homes across the state, but also establish a clearer pathway for broader stamp duty reform.”
South Australia’s Malinauskas government announced in the middle of this year it would cut stamp duty for first home buyers who buy a new home (including a house, flat, unit, townhouse or apartment), an off-the-plan apartment, a house and land package or vacant land to build a new home.
50-suburb supply push
In an expansion of the government’s Activity Centre program, Premier Allan and Minister for Planning Sonya Kilkenny visited Middle Brighton train station on the weekend to announce the station will form the heart of one of 50 new “train and tram zone” Activity Centres to help deliver more than 300,000 additional homes across Melbourne by 2051.
The new zones will encourage more homes around high-frequency train lines – with the first 25 announced today focusing on stations that benefit from the soon-to-be opened Metro Tunnel (Carnegie, Hughesdale, Murrumbeena, Oakleigh, Middle Footscray, West Footscray and Tottenham stations) and the well-serviced Frankston (Toorak, Hawksburn, Armadale and Malvern), Sandringham (North Brighton, Middle Brighton, Hampton and Sandringham), Belgrave/Lilydale (Hawthorn, Glenferrie, Auburn, Blackburn, Nunawading and Mitcham Stations) and Glen Waverley (Tooronga Station, Darling Station, plus a combined centre covering both Gardiner and Glen Iris), as well as Toorak Village on the Route 58 tram line.
“We can get more homes built where young Victorians and families are telling us where they want to live – close to transport, jobs and their families,” Kilkenny said.
Owen said the “question of feasibility” comes to mind.
“Is this the right kind of supply for increasing home ownership? High-density unit development in Melbourne was common in inner-city areas throughout the 2010s, but these were largely bought by investors and have not exactly led to prosperity and wealth creation for their owners.
For millennials having kids and seeking a family home, high rises are not traditionally a popular option – 2021 census data showed just 1.7% of one-family households resided in units in a nine or more storey block, compared to 82% of one-family households living in a detached house.
“However, units in established, affluent areas could provide an excellent downsizing option for empty nesters, freeing up more family homes,” Owen said.
Ryan said a strong pipeline of new housing in established areas will “pave the way for long-term stability in the housing market”.
Council to Homeless Persons last week urged the Victorian government to develop at least 6,000 public and community dwellings each year for a decade to combat the housing crisis. The Allan government is pushing ahead with plans to redevelop 44 public housing towers as part of a controversial program it bills as Australia’s “largest-ever renewal project”.
The raft of announcements follows a RedBridge poll earlier this month that had the Victorian Liberal Party ahead of Labor in a head-to-head poll for the first time since 2017.
