NSW stamp duty changes & rates to peak earlier
Interest rates are predicted to peak lower and pause earlier than originally expected. A cash rate of around 3.6 per cent is where most expectations are now sitting. Some reputable experts believe we will only get to 3.1 per cent, which means we’ve got one more rate rise to go. Hopefully, for home owners and potential buyers, this ends up being true and for NSW first home buyers, there’s more good news. First home buyers can now opt to pay an annual property tax instead of upfront stamp duty, as the NSW Government legislated the First Home Buyer Choice scheme this week.
Rates will peak lower and pause earlier, then fall sharply
Following softer-than-expected US October inflation data, and filtering this through the understanding of what eventuates in the US is somewhat likely to filter through to our market here in Australia, experts believe that the Reserve Bank of Australia (RBA) won’t increase rates as high, and pause these hikes earlier than expected. RBA deputy governor Michelle Bullock said this week, “maybe there might be an opportunity to sit and wait and look a little bit”.
Nearly every economist whose comments have been published in the media this week has confirmed that a .25 per cent increase by the RBA in December was still almost certain. This will be the eighth straight increase since interest rates started rising from .1 percent in May 2022, to what is likely to bring the cash rate to 3.1 per cent. Could this actually be the peak or is this the rate at where the RBA will pause for a while? CBA’s economist Gareth Aird agrees with this notion, forecasting that December’s rise will be to a peak or “terminal rate” of 3.10%, with this potentially being the point where rate rises will pause.
Other experts believe in 2023, we will see another rate rise or maybe two, which would get our cash rate to around 3.4-3.6 per cent. NAB’s senior economists believe the cash rate will get to this 3.6 per cent mark by March 2023, meaning we will have 3 more rate rises of 25 basis points, but then they also said this increase will be followed by a pause.
It will be really interesting to see how the unemployment rate and the overall inflation data (see assumptions in the images above from the RBA) actually react to these rate increases or the speed at which they do. Some experts believe that spending through this summer will soften, and all these rate rises will catch up to households, filtering through to the inflation figures in the economy and slow things down in early 2023. The April and July 2023 statistics from the Australian Bureau of Statistics (ABS) will be telling (see here below the key dates to watch).
All eyes on the data
Ms Bullock from the RBA also said, “If we have some particularly bad news on inflation...then don’t doubt our resolve to increase your interest rates quite quickly”. This means that the RBA will continue to do what it takes to increase rates to control inflation, and they will do it quickly again if need be.
Overall though, these comments from the RBA are what can be referred to as dovish and relatively positive from an interest rate perspective, and with the inflationary data from the US this week, one can think that maybe we do have only a few more rate cuts to go before they fall. Goldman & Sachs believe when rates begin to fall, they will fall sharply and by 110 basis points over 2024, to 3 per cent.
Stamp duty in NSW is changing, it's official
In other stimulating news for the property market this week, the state government of NSW had the First Home Buyer Choice scheme pass the upper house. This means that from 16 January 2023, first-home buyers have the choice between paying an annual property tax or stamp duty for properties up to $1.5 million. This would effectively be NSW’s 4th state scheme available. Whether or not this is in each purchaser's best interests, will be different for each person.
From 11 November 2022 to 16 January 2023, there is a transitional period where eligible first-home buyers will have to pay transfer (stamp) duty, but can then apply for a refund of the duty after 16 January 2023 on the Revenue NSW website.
First Home Buyer Choice eligibility
must be an individual (not a company or trust)
must be over 18 years of age
At least one person you’re buying with, must be an Australian citizen or permanent resident. One person can be an overseas citizen, the other, a citizen.
you or your spouse must not have previously owned or co-owned residential property in Australia, received a First Home Buyer Grant or duty concessions
Property must be worth less than or equal to $1.5 million
must move into the property within 12 months of purchase and live in it continuously for at least 6 months
must sign the contract of purchase on or after the scheme commencement date (set for 16 Jan 2023)
First home buyers will have a choice
(a) paying the usual amount of stamp duty based on the ‘dutiable value’ of your property - the normal amount of stamp duty
or
(b) paying an annual property tax based on the unimproved land value of the property. The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 will be:
$400 plus 0.3 per cent of land value for properties whose owners live in them
$1,500 plus 1.1 per cent of land value for investment properties.
Note, existing first home buyer duty exemptions for the state, and concessions, are not changing. Existing stamp duty concessions for first home buyers are available for purchases of up to $800k, and these concessions will continue. The property tax option will be available for properties for up to $1.5 million.
For a summary of all the federal and state government initiatives on offer, click here to be taken to our First Home Buyer Loans page.
The 2022-23 Federal Budget snapshot
Here’s a quick snack-sized summary of the key housing-related points from the most recent federal budget, if you missed it:
- National Housing Accord: a deal between the federal government and the states, providing 1 million homes between 2024 and 2029, with a clear focus on increasing housing supply
- Regional First Home Buyer Guarantee: helping first home buyers living in regional Australia by covering their mortgage insurance cost via a guarantee, with only 10,000 spots available.
- Help to Buy Scheme: a scheme where eligible buyers will have access to an equity contribution to buy a home with a smaller deposit and smaller mortgage. A summary of this scheme is also available in the First Home Buyer Loans page on our website
- Lastly, there’s help for downsizers to help free up real estate for younger and larger families of Australia Money towards DHA Defence Home Ownership Assistance scheme - $46.2million to this sector, including monthly subsidies and more
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