At a time when home ownership is becoming increasingly difficult to achieve, the government of Victoria has intervened with an extraordinary measure to encourage the purchase of new homes.
For the next 12 months, buyers of apartments, units and townhouses purchased off-the-plan will be able to benefit from a significant reduction in the stamp duty tax.
Stamp duty is often a hefty expense for homebuyers and it will now be calculated by excluding the construction cost from the total value of the property.
In practice, buyers will only pay the tax on the value of the land instead of the completed building.
This concession, which was previously limited to first-home buyers and owner-occupiers, is now being extended to all buyers, with no limit on the value of the property.
The goal of this measure is twofold: to provide economic relief to buyers in an increasingly competitive market and to stimulate the construction sector, encouraging new projects and supporting the local economy.
This initiative could have a significant impact on both for those dreaming of homeownership and for real estate professionals.
But will it? What are the real implications of this initiative, and what will its long-term effects be? We asked Jo Agresta, a real estate agent and co-founder of Abodey, a sophisticated platform powered by artificial intelligence.
Abodey shows potential buyers homes for sale that best match their needs and tastes, connects them with trusted experts and guides them through every stage of the buying process, promising to reduce search times from nine months to an average of six weeks.
“Stamp duty is essentially a government-imposed tax buyers pay when purchasing a property,” explains Jo Agresta.
“It’s calculated based on the property’s value and varies by state. This upfront cost can be a huge barrier, especially for first-time buyers who already struggle with savings.
“Over the years, it’s contributed to slower turnover in the property market, as people hold onto properties longer to avoid paying it again on a new purchase. It’s a bit of a bottleneck, especially as property values have increased.”
According to Agresta, this new incentive promoted by the Victorian government could encourage more transactions in the short term by reducing initial costs and making the idea of buying a property more attractive.
“However, there are concerns it might inflate property values if demand increases too rapidly, especially in sought-after areas,” she warns.
“While this helps ease the burden on buyers initially, without broader affordability measures, there’s a risk of creating new pricing pressures in the long run.”
Moreover, as Agresta points out, this concession will be more advantageous for some buyers and less so for others, and it remains to be seen what its actual impact will be on the broader market.
Despite the reduction in stamp duty, buyers are still facing a difficult real estate market due to rising interest rates, the high cost of living and the limited availability of properties.
“So, while this helps, it’s only one piece of the puzzle,” concludes Agresta.
In short, the initiative does not appear to be as convincing or decisive as hoped, and may be less influential in the decision-making process for buying a property.
Among the many voices testifying to the challenges of the real estate market is Sara Fredducci’s. Fredducci is an Italian resident in Victoria, who began her home search at least three years ago.
“House prices go up every day, so facing this expense is already very difficult in itself,” Fredducci explains.
“When you add to that the interest rates applied by banks and taxes, it feels like we’ll never be able to reach the point of actually buying.”
The inaccessibility of the housing market is pushing buyers to consider a lifestyle change, directing them toward less desirable suburbs further from work, often with fewer amenities.
“We have a young daughter, and my family [from Italy] visits every two years,” Fredducci continues.
“I also run a business from home, so my ideal house should have at least three or four rooms.
But here in Melbourne, properties like that are definitely out of our budget, and the reduction in stamp duty doesn’t seem to make a big difference in the price we would have to pay.
“That’s why we’ll continue searching and postpone the purchase for a few more years.”
Even those who have already bought a home seem to share a similar view. Take Veria Lavista, an accountant and event organiser — now working for the Casa D’Abruzzo Club - who purchased a property last December, paying a stamp duty fee of $43,000.
“It’s an investment that doesn’t return anything,” Lavista says regarding stamp duty. “It’s a tax paid to the government that doesn’t provide any tangible services or benefits for the buyer.”
According to Lavista, the reduction in stamp duty will not have much effect on the real estate market, as it continues to be undermined by other issues that make the buying process very difficult.
“The savings are minimal compared to the hundreds of thousands, if not millions, of dollars currently being asked by the market to buy a property, even for small families like mine,” concludes Lavista.
In the face of an unstable and difficult real estate market, Agresta believes that a more effective solution for alleviating the heavy upfront burden faced by buyers might be to switch to an annual tax, similar to the plan used by the Victorian government for commercial properties.
This, according to Agresta, could be more effective as it would spread costs over time.
“While not perfect, reforms like this could ease some strain on buyers and potentially improve market fluidity in the long run.”
