"The shackles are off": What the abolition of stamp duty really means for the Melbourne new apartment market
It's fair to say that the Melbourne property market has been the most challenging property market across Australia since onset of the pandemic.
Rolling lockdowns, more than any other state capital, and up there with one of the most locked down cities in the world, put the city back several paces.
This, combined with the lifestyle shift to regional areas driven by COVID, rapid interest rate increases, and ongoing tax hikes over several years, has left many demographics—who are typically eager to buy property—in a holding pattern.
Until now.
The Allan Government has introduced two key policies that they believe will stimulate the off the plan market.
The first was the announcement that they were encouraging new apartment development around 50 train and tram stations.
So far 25 of the 50 have been named, with a focus on stations that benefit from the Metro Tunnel and the well-serviced Frankston, Sandringham, Belgrave/Lilydale and Glen Waverley Lines. The rest of the stations will be announced before the end of the year.
The biggest announcement however came earlier this week when the government abolished stamp duty for anyone buying off the plan. What's more, unlike previous policies that saw stamp duty paused, this policy applies to every buyer, at every price point, across the whole of Victoria, for exactly 12 months starting from October 21 2024 to October 21 2025.
Urban.com.au CEO Mike Bird said the challenges of the market have been well documented in the last few years, but the effect of the stamp duty changes will be felt immediately
"The shackles are off and buyers are going to be able to save tens, if not hundreds of thousands, in the next 12 months," Bird says, adding that the market, both developers and buyers, have been waiting for this sort of stimulus for several years.
"The demands put on the VIC government from the sector has forced its hand to act. We're at a significant shortfall of housing across Victoria.
"Developers aren't developing, in part because a large section of buyers can't afford prices of new apartments, which have gone up due to the cost of labour and materials. The rapid increase in interest rates has pushed first home buyers and investors out of the market, while downsizers have proven slow to respond to new apartments because they have to pay the stamp duty tax and they're choosing to stay in their homes for longer.
“While this isn’t a silver bullet, when paired with upcoming interest rate cuts, it should have a material impact."
Bird says the next step is to apply the same policy in the house and land sector.
Scott Jessop, Head of Sales and Marketing at Sunkin Property Group who is developing Highett Common, set to be the first Net Zero Community in Victoria, says that the upcoming changes will benefit all of Victoria, impacting anyone looking to purchase or rent a property in the future.
However, he emphasizes that this is just a small step toward restoring a normal housing supply environment. Over the past decade, various negative taxes and challenges have contributed to a significantly suppressed housing supply, which has played a major role in the current housing crisis.
Jessop says the stamp duty will help the supply of rentals due to investors now more likely to get into the market.
"I've seen investors over nearly 20 years in the market as the fundamental backbone that brings the most affordable long-term rental properties to the market and essentially housing supply.
"For both local and foreign investors that I've previously seen, the majority of them want a return on their investment and it's these types of sales, when combined with first home buyers, downsizers, and rightsizers, allows developers to secure their pre-sales to bring a project out of the ground to deliver the supply of housing."
Jessop says despite the announcement only coming earlier this week, enquiry rates have already risen.
"People can see there is real value in Melbourne's off the plan apartment and townhouse market when you compare it to Brisbane, Gold Coast, Adelaide and Perth's market values over the past couple of years. We also know that fundamentally Melbourne is still a great market overall and may have struggled a bit post-COVID, however good quality real estate and a good quality city will always prevail long term and a shift in interest rates and population growth will certainly assist with this."
After great success of the first two stages, Sunkin recently released the third stage of Highett Common. The Mews Collection comprises a trio of buildings with 185 one, two and three-bedroom apartments. The Mews Collection also includes the first luxury apartments within the precinct.
Read more: Sunkin reveal The Mews Collection, Highett Common's latest release
Developer SMA Projects accidentally timed the launch of their newest apartment project to perfection. It was earlier this month that they launched The Regent Fitzroy, their new development of 64 one two and three-bedroom apartments on the site of the former Regent Theatre on Fitzroy Street. Now buyers can take full advantage of stamp duty savings across each of the configurations.
Emily Shaddick at SMA Projects said those spending $2.5 million on an apartment at The Regent will save well over $100,000 in stamp duty for the next 12 months.
"The savings will encourage downsizers out of their homes where previously they were looking at a hefty bill to do so," Shaddick says, adding that even buyers of the one-bedroom apartments at The Regent will save more than $30,000.
Shaddick expects that, with no cap on the purchase price to receive a saving, downsizers will act swiftly on the savings.
"Downsizers and rightsizers now have an opportunity to secure a quality off the plan apartment with a floorplan that really suits their needs, and whilst developers are constructing the property, the purchaser has the flexibility to sell their current home in a future market when inevitably interest rates fall and the established market has responded."
Marshall White Director, Leonard Teplin, who is working across several developments across Melbourne, particularly in the downsizer space, has seen a marked uptick in enquiry in a few short days since the announcement.
"This is a game-changer for downsizers," Teplin says.
"They can now purchase high-end apartments or townhouses without the hefty stamp duty, making the transition more financially appealing. I expect to see a surge in downsizer activity, especially in premium inner-city and Bayside locations. This also has a dual benefit of encouraging downsizers to transition from the family home, and therefore, making more established housing available for family buyers."
Teplin believes there will be a significant boost in off the plan sales over the next 12 months, however, the VIC Government hitting its full-year target of delivering around 80,000 homes might still be challenging due to construction industry capacity constraints and planning approval timelines.
"If the scheme proves successful, there could be a strong case for extending it beyond the initial 12 months to maintain momentum and address long-term housing supply issues."
Noorden Projects Director Dave Lamond says he's already received "quite a few calls" from potential purchasers looking to make the most of the stamp duty savings they may be eligible for.
"The opportunity can certainly help the higher-end apartment buyers to make the figures work and developers to encourage purchasers to put pen to paper," Lamond says.
"Now is the hustle to get the figures through the quantity surveyors to help give people the confidence around their potential stamp duty."
He says the savings have opened up an opportunity at some of the more premium developments he's marketing, like Duke in Collingwood which is under construction.
"It’ll be a busy 12 months in the luxury market."
