Let’s first look at what is proposed after the Queensland State Budget. Quotes taken from the Budget Speech (http://www.budget.qld.gov.au/budget-papers/2011-12/bp1-2011-12.pdf):

“For six months from 1 August this year, any Queenslander buying a newly constructed home or signing a contract to build a new home will be eligible for a $10 000 grant from the State Government.”

“For first home buyers this can mean $17 000 – up-front. They will also pay zero stamp duty for properties under $500,000, zero mortgage duty and thus keep the full $17 000 from the $10 000 boost announced today being added to our existing $7 000 grant.”

“The $10 000 will apply across the board to all buyers of new homes under $600 000”

All good news if you are in that particular market. Especially good news for builders & developers as this will give some boost. However this is a short 6 month programme and not something to hang the Real Estate Market hat on. There is also speculation that this rebate will inflate homes in that market accordingly and thereby negate any benefits. A possibility, but with high competition from Sellers and Developers, this may not eventuate quite like it did when the First Home Buyers grant originally rolled out. If anything I can see more pressure placed on sellers of homes who would normally attract those first home buyers deciding whether to build or buy.

The treasurer also mentioned “…buying a newly constructed home.” I’d be interested to see the details as to what constitutes newly constructed?

So one hand giveth, but the other taketh away.

The State Government will remove the ‘rebate’ on stamp duty for those existing home owners buying a property to reside in. This is to take effect as of 1 August 2011.

The Treasurer justifies this change by inferring current home owners have had it too good for too long and that by removing this ‘discount’ somehow our kids will be better able to afford homes. Huh??

“Existing home owners have enjoyed the wealth of the surging home prices of the last decade. As prices have risen, incumbent owners have benefitted while those outside the market have found it harder to break into home ownership. It’s a well-known story: those in the market look to trade up with the benefit of the increased value in their home. Currently this group of people get access to a special discount on stamp duty when they purchase a new home.  

The policy case for maintaining this discount in 2011 is not compelling. The discount does not add to the supply of houses, which is what really matters if we want our kids to be able to afford their own homes. I announce the discount will end on 1 August – providing notice for those in the market at present. Removing the discount and implementing a stimulus measure to support new houses being built is a choice we are prepared to make.”

Come on, I don’t see a 6 month package for new homes as making housing affordable for my kids in the future. The reality is, the Government needs money and this is a way to get it. Just like the fuel rebate, the argument is Queenslanders have had a benefit the other states don’t, so we are now taking it back. It is a way of taxing by explaining it off as a discontinuation of a rebate (which isn’t a tax – right?).

The Treasurer even admitted: “Stamp duty from the property market is down nearly $350 million from the original budget forecast.”   

So Government rhetoric and weak justification aside, what is the outcome?

If you are selling a house which is NOT a newly constructed home, the Buyer will be paying considerable more for Stamp Duty. (eg: On a $500,000 home, Stamp Duty will change from approx $8,750 to approx $15,900 – an increase of just over $7,000).

As (I understand) the Stamp Duty increase applies to contracts secured as of 1 August 2011, you will probably see a bit of a rush from Buyers to finalise contracts of sale by that date, then a lull. Hence if you are Selling, make sure your property is meeting the market now and make use of this window.

Once the initial impact has passed, Buyers will purchase accordingly to their needs and budget. The higher Stamp Duty will just become par for the course and the accepted cost of purchasing a home, as is the case with the other states. 

 When you buy fuel now, do you look at the $1.38 a litre and think “hmmmm, if the rebate still applied it would only be…”.  Most people now just view it as the price it is – you still need fuel.

 There may be a small increase in newly built homes/construction for first home buyers, but again this is a small section of the market and probably won’t have much impact. If new home owners had planned to build, it’s great for them, otherwise it will have little effect. 

 The Real Estate market does run on confidence and the Stamp Duty increase simply knocks that confidence further, at least for the moment. Not something it needs. But that will change and the increase will be absorbed and be considered the norm.  Real estate is still considered an excellent investment and most Australians want to own their own home, that won’t change.

Shawn