Major cuts to stamp duty have been announced as part of the Victorian Government's larger plan to supercharge housing supply, with the much-debated levy slashed for off-the-plan properties for the next 12 months.
In an effort to stimulate development, the Allan Government is slashing stamp duty on Victoria's off-the-plan apartments, units and townhouses to cut upfront costs, speed up building, and make it more affordable for all home buyers to purchase off the plan.
The one-year stimulus aims to support industry to deliver more homes for buyers and renters across the state, and is expected to cost the government $55 million over the period.
Taking immediate effect from Monday, 21 October, the temporary stamp duty concession is no longer capped to specific price points or first-home buyers – now, all buyers are stamp-duty exempt for eligible properties at any price point.
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The move hopes to encourage more Australians to enter the property market, and remove a major barrier for developers trying to build new stock for Victoria's ambitious target of 80,000 new homes per year, during the next 10 years.
"We asked industry what they need to build more homes sooner – and this is what they said,” Victorian Premier Jacinta Allan said.
"It will get more of these projects away sooner. And what that means is it unlocks more homes for everyone."
More formally known as land transfer duty, stamp duty is essentially paying the government a fee for transferring a property’s title into your name. The one-off fee has long been viewed as a burden for purchasers and the construction industry alike, as well as a stumbling block for older Australians looking to downsize.
The cuts are just one part of the Allan Government's answer to address the housing crisis.
Allan has already announced that high-rise residential towers will be fast-tracked across 50 public transport hubs in suburban Melbourne, under a radical overhaul of the state's planning laws, with further announcements to be made throughout this week.
An impetus to downsize
REA Group head of economic research, Cameron Kusher, said there was more the government needed to do to address the deeper challenges that removing stamp duty alone would not necessarily solve. But he did see multiple positives with the scheme.
"It will definitely make people think about downsizing. We know one of the reasons people don't downsize is because there is that stamp duty cost, and if they don't have to pay that, it certainly makes it attractive," Mr Kusher said.
He said it would see larger established homes back onto the market for younger families looking to upsize, with older Australians hopefully snapping up any oversupply of three- and four-bedroom off-the-plan properties.
MORE: Four reasons why Boomers are reluctant to downsize: New data
The Victorian government has announced a plan to slash stamp duty on apartments, units, and townhouses bought off the plan. Picture: NewsWire / Nadir Kinani
'The beginning of our sector's recovery'
As for the industry, the aim is that it will help stimulate stagnation and drive further growth.
With a concession reducing upfront costs for more buyers, developers could look forward to more pre-sale success – which would help meet finance requirements faster and start the construction of new homes sooner.
"I think what is positive for the Melbourne apartment market is it will start helping some of these projects get some sales and clear some of that stock that's been sitting on the market, potentially encouraging developers to start kicking off new projects," said Mr Kusher.
Major Australian developer, Mirvac, welcomes the "decisive action" from the Allan Government, which it believes will encourage more Victorians into the housing market.
"Along with a continued focus on boosting supply and increasing the efficiency of the planning system, these initiatives are critical to helping support new home construction and bring confidence back to the market," said Mirvac general manager of residential development Victoria, Elysa Anderson.
Jellis Craig director of project sales Stephen Bowtell currently works across 25 development projects and has been swamped by the positive response from industry and purchasers alike.
"I've been overwhelmed with contact today from developers, but also purchasers – one who told me that they weren’t ready to buy on Friday last week, and today asked to meet again to discuss next steps," Mr Bowtell said.
“This announcement has been sorely needed in the industry and has already generated immense positivity in the market. I believe this is the beginning of our sector's recovery. It's a genuine incentive that we feel will move the dial for purchasers – whether they're first-home buyers, young professionals or downsizers."
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The scheme aims to drive growth in Victoria’s off-the-plan sector, which had been slowing due to high taxes and market uncertainty. Now, substantial stamp duty savings are available for a limited time.
The break needed until interest rates fall
Victorian treasurer Tim Pallas said the scheme was designed to be a short-term intervention to help ease struggles until interest rates reduced, which he said would likely happen within the next six months.
"At the moment, we know that the industry is in a difficult situation, and what they need is the ability to be able to put away these vitally important projects. We expect that over the next 12 months, the material circumstances of the industry will improve," Mr Pallas said.
The timing of the scheme was helpful, according to Mr Kusher, who noted the expectation of when interest rates were going to be cut has already been pushed out.
"Even a week ago, people were expecting interest rate cuts around February of next year for the first cut. The timing of that in terms of the futures markets is now being pushed out to April, and there's now only one more cut after that April cut expected next year," he said.
Mr Bowtell was interested to see the positive impact the initiative could have on the housing sector in the coming year, irrespective of cuts.
"The challenges in our industry are multi-faceted, so it's great to see the government taking a multi-pronged approach with initiatives in planning and stamp duty savings. We hope this is just the first of many announcements that will help unlock supply in the market and foster sustainable growth for the future."
MORE: Nine of Melbourne’s best new off-the-plan apartment developments
Previous stamp duty concessions
Previously, first-home buyers and owner-occupiers could access a stamp-duty concession when they bought off the plan, allowing construction costs to be deducted from the sale price when calculating how much stamp duty they owed.
This was capped for first-home buyers and owner-occupiers.
To access the concession, the reduced value for stamp duty calculations, following the deduction of construction costs, had to be lower than thresholds of $750,000 for first-home buyers and $550,000 for owner-occupiers – otherwise the concession wasn’t available.
As of today until 21 October 2025, those limitations have been scrapped.
Anyone – including investors – can access the benefit, and there are no price caps.
The cuts to stamp duty are for a limited time and only on off-the-plan properties, so prospective buyers will need to act promptly to ensure they take advantage of the savings afforded by the 12-month scheme. Picture: Highett Common / realestate.com.au
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How will Labor's temporary off-the-plan duty concession work?
The temporary off-the-plan duty concession applies from 21 October 2024, and allows a 100% deduction of outstanding construction and refurbishment costs when determining how much stamp duty is owed.
The new concession will be available to all off-the-plan purchases and will allow the purchaser to deduct the construction costs incurred on or after the contract date when determining the dutiable value of the purchaser’s property.
In other words, the amount of stamp duty paid will be calculated based on the cost of the land prior to construction, not the total price of the finished property.
Example: A Victorian buys an off-the-plan apartment for $620,000. The land was valued at $77,500 so they would pay just $4000 in stamp duty, rather than $32,000 – a substantial $28,000 saving.
What types of properties are eligible?
An eligible apartment, unit or townhouse is one that is in a strata subdivision – meaning they retain common property such as a driveway or a shared hallway.
Are house and land packages eligible?
No, house and land packages are not eligible for the extended stamp duty concession.
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 the 12-month extension.
Are new apartments and townhomes that have been completed but not lived in yet eligible?
No. Contracts signed before the commencement date of this concession, but settled during the 12-month window, are ineligible.
Off-the-plan concession eligibility is determined based on the date you sign your contract.
As long as you sign your contract within the eligibility period, being on or after 21 October 2024 for a period of 12 months, you will be eligible for the off-the-plan concession regardless of when you settle the transaction.
For developments currently under construction, buyers are also eligible for reduced stamp duty, but the savings depend on the amount of construction completed at the time of purchase.
What is the price cap on eligible homes?
There is no price cap on eligible homes.
What are the eligibility requirements for buyers?
The concession will be available to all purchasers, including investors, companies and trusts, meaning there would be no requirement to be eligible for either the principal place of residence duty concession or the first home buyer duty exemption or concession.
The existing off-the-plan concession for owner-occupiers and first home buyers will continue to apply.
Is there an income limit for those eligible?
There is no income limit for eligibility.
Are foreign buyers eligible?
Yes, foreign buyers are eligible, however the concession does not apply to foreign purchaser additional duty (FPAD) as this is calculated on the dutiable value of the property before any off-the-plan concession is applied.
The off-the-plan concession will only apply to the general land transfer duty liability.
When does the scheme start?
21 October 2024.
How long does the scheme last
One year, until 21 October 2025.
The temporary off-the-plan duty concession is a time-sensitive initiative. Prospective buyers should act promptly to take advantage of the scheme, as the concession will revert to its previous set up after the 12-month period ends.
Looking for new off-the-plan properties? Browse our dedicated New Homes section.
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