How home owners and investors can pay no stamp duty when you buy a property in Melbourne. And why it’s a bad idea.
The Victorian Government has introduced what seems to be an attractive offer for purchasers of new residential property before June 30, 2022: a 50% stamp duty concession or 100% stamp duty concession if the property has been on the market for more than 12 months.
While this may look good news, it’s likely to be a poison chalice.
Why?
Because the offer only applies when you buy an apartment in the Melbourne CBD.
This may be good news if you want to buy an apartment to live in and don’t care about future capital growth. But even then, if you are a first-time property buyer, there may be a better option.
It doesn’t matter if you are a home buyer or investor; the money you save now may cost you big in the long term.
Despite the enormous savings, I don’t recommend you take advantage of this offer for several reasons.
There has been an oversupply of apartments in Melbourne’s CBD long before COVID-19, and they have been underperforming for years.
Apartment buyers have been offloading them at losses of up to 40%, and in some cases, they still can’t sell them. And many were bought ten or more years ago but still sell for a significant loss.
Inner-city investment properties are what I call a sexy investment. A two-bedroom apartment in the heart of the city comes with bragging rights. Not so much a three-bedroom house in Melton.
Guess which investment has easily outperformed the other? Yep, the house in Melton.
To illustrate my point, let’s search on CBD apartments for sale at www.realestate.com.au.
The first apartment on the list is in Spencer St. The price range is $270K to $300K; it last sold 13 years ago for $340,000. Capital growth of -1%
The second is in Little Lonsdale St with a price range of $500K to $518K; it last sold 11 years ago for $450,000. Capital growth of 1.28%
Now let’s search on houses in Melton; the first house on the list is a modest 3-bedroom home in Plover St. The capital growth on this home has been 6%. Which means it will double in value every 12 years.
You may be thinking, “sure, but property prices have gone up everywhere lately” That’s true, but this modest three-bedroom home in Melton has had 6% capital growth for over 37 years.
Not a sexy inner-city apartment with great views, just an average family home for a typical Aussie family.
And if you are thinking of buying an investment property right now, that is precisely what you should buy. Get in touch if you want my help.
These stamp duty savings are in place to support property developers first and foremost, not home-buyers or investors.
Don’t let incentives or savings dictate what you buy.
What if you want to live in the inner city?
Then become a rentvestor. Live where you want to live, take advantage of the city’s low rents, and buy a quality house in a quality suburb as an investment property.
And guess what? If you buy a new property, you will get lots of tax deductions, and that extra money in your pocket and your rental income will buy the property for you.
If you feel for your circumstances, this stamp duty discount is of interest. You can read more here.
Disclaimer: The opinions posted within this blog are those of the writer and do not necessarily reflect the views of Better Homes and Gardens® Real Estate, others employed by Better Homes and Gardens® Real Estate or the organisations with which the network is affiliated. The author takes full responsibility for his opinions and does not hold Better Homes and Gardens® Real Estate or any third party responsible for anything in the posted content. The author freely admits that his views may not be the same as those of his colleagues, or third parties associated with the Better Homes and Gardens® Real Estate network.