Victorian stamp duty is being branded a “second deposit” as buyers are forced to borrow the tax, turning a $48,000 bill into a $98,451 long-term debt hit.
The tax burden for a Melbourne home is now so extreme homebuyers are borrowing money to fund the cost in a move experts have warned can become a “$100,000 debt sentence”.
New Money.com.au research reveals nearly half of buyers are now increasing their loans just to fund stamp duty and other mandatory charges.
At Melbourne’s median dwelling price of about $849,000, stamp duty is roughly $48,000.
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In a blow for aspiring homebuyers, the state has the nation’s highest stamp duty costs — in part because it has set high tax requirements for homes in certain price brackets that would have been reserved for more elite purchases historically, then never reduced them as those prices became normal.
In 2008 the state set a new top tax threshold for homes above $960,000, today this is capturing the majority of houses sold in Melbourne despite the initial intent being to capture only homes that would be nearer the top end of the market.
The Andrews government implemented another stamp duty bracket at $2m in 2021 aimed to charge even more for sales above that price — but did not reduce the tax burden for purchases around the city’s median price.
First-home buyers get a full exemption up to $600,000 and a sliding concession up to $750,000. Above that, full duty applies.
At 5.49 per cent interest, Melbourne’s $48,000 median stamp duty bill can balloon to $98,451, including more than $50,000 in pure interest.
In many Melbourne suburbs, $1m is now a standard family home price point. That means buyers purchasing around $1m receive no first-home stamp duty relief at all.
The Allan Government has targeted relief through measures such as off-the-plan stamp duty concessions, but the core first-home buyer thresholds remain fixed.
Money.com.au’s research shows that if you borrow the $48,000 for stamp duty at the city’s median dwelling price, and pay 5.49 per cent interest that tax bill more than doubles to $98,451 over a 30 year loan — adding more than $50,000 in interest to the tax.
The tax is so high brokers are now calling it a “second deposit” for buyers to contend with.
Of those buyers, 28 per cent borrowed extra to cover all upfront costs, while 18 per cent increased their loan specifically to pay stamp duty.
Margin Finance director Damien Medici warns buyers without equity or a guarantor simply cannot borrow 100 per cent of a purchase plus stamp duty.
Money.com.au mortgage expert Debbie Hays said the upfront debt sentence was reshaping how Victorians enter the market.
“For a lot of buyers, stamp duty now feels like paying a second deposit,” Ms Hays said.
“And when that tax is rolled into the loan, you’re paying interest on it for the life of the mortgage.”
Ms Hays said the risk was not theoretical.
“If a rate rises, something breaks, or life throws a curveball, they’re under pressure immediately,” she said.
Margin Finance director Damien Medici warned many first-home buyers simply cannot absorb the tax without family backing.
“If you don’t have a guarantor or equity, there’s simply no way to borrow the full purchase price plus stamp duty,” Mr Medici said.
“For owner-occupiers, the only way to borrow more than the purchase price, usually about 106 per cent once stamp duty and fees are included, is with a guarantor or equity.
Convergence Buyers Agents director Sky Hammer says many buyers now run two budgets after stamp duty wipes tens of thousands from their savings.
“In other words, if you cannot fund the tax yourself, you are locked out unless parents step in.”
Mr Medici said the bank of mum and dad was becoming decisive in who could and could not buy.
“We see it all the time. It’s very common now,” he said.
He added that where buyers capitalise stamp duty using equity, they are paying interest on everything, including the tax.
Convergence Buyers Agents director Sky Hammer said many buyers now ran two budgets, what they thought they could afford and what they could actually complete once stamp duty was factored in.
“On a $600,000 purchase in Victoria, stamp duty is around $35,000,” Mr Hammer said.
“You might think you’ve saved a solid deposit, then suddenly a huge chunk of it disappears straight away.”
Mr Hammer said buyers often responded by cutting their price point rather than their wish list.
“On a $1m family home, stamp duty can be about $60,000,” he said.
“If you drop your budget to $600,000, that falls closer to $30,000 to $35,000.
“That difference alone can reset what’s achievable.”
Real Estate Institute of Australia president Jacob Caine says 90,000 Victorians are frozen on the housing ladder each year because of stamp duty.
The Convergence Buyers Agents director said buyers who stretched to clear stamp duty often finished with little buffer left.
“Some buyers walk away with only a few thousand dollars left,” Mr Hammer said.
The squeeze is worsening because Victoria’s stamp duty settings have not moved with house prices.
Real Estate Institute of Australia president Jacob Caine said the consequences were rippling across the entire housing system.
“Stamp duty was originally justified as a tax higher up the market, but that is no longer how it operates,” Mr Caine said.
“What we are seeing now is a tax that actively discourages people from moving, even when their home no longer suits their life.”
“In Victoria alone, around 90,000 people do not move each year because of stamp duty,” he said.
“That means downsizers do not downsize, upgraders cannot upgrade, and families stay put not because it suits them, but because the cost of moving is too high.”
Without equity or family backing, banks will not lend the full purchase price plus stamp duty, locking many first-home buyers out.
Mr Caine said when people cannot move, supply tightens.
“That pushes prices higher and makes affordability worse for everyone, including first-home buyers trying to get in, and the growing trend of households borrowing to pay stamp duty is a warning sign,” he said.
“When ordinary households are forced to finance a government-imposed tax over decades just to pay it, it tells you the system is no longer working as intended.
“The biggest risk is household buffers. Buyers are already stretching to get in, and when they are that close to the line, even small changes can become dangerous.”
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