There is often lots of media hype and negative speculation to accompany major property tax reforms. However, the recently announced decision by the Victorian State Government to remove the ability for investors in new Victorian property to access its attractive “discounted stamp duty policy” for off the plan purchasers (“OTP”) from 1 July is a lot more significant for the Melbourne property market than many people think. For those of you who don’t know, property purchasers in Victoria who purchase OTP are only required to pay a small portion of the stamp duty that would be payable for the property once complete and so this gives an additional incentive for purchasers to buy new rather than existing property. It also is a benefit of investing in Melbourne as opposed to any other major Australian city. Well that is about to change because the recent announcement to exclude investors moving forward after July 1 is part of the State Government’s “Housing Affordability” package but Ironfish along with many top industry experts believe the policy will result in many unintended consequences and result in making Melbourne’s residential property market less affordable and not more affordable as they would like.
Many industry experts are questioning the wisdom of the Government introducing this policy change at a time when finance is tougher for developers and purchasers, on top of the further impact of recent changes to the Apartment Design guidelines which are all combining to reduce the supply of new projects delivered to the market at a time when there is record demand. The likely consequences of this is that prices will rise and the market will become more expensive for all and definitely will get harder not easier in terms of affordability. Whilst first home buyers and owner occupiers retain the OTP discount and this may on the surface seem like it will be cheaper, the supply of new apartment projects will reduce and the market in our view is likely to kick up and more than compensate for any short term benefit in affordability.
So, is this good or bad for me? Well this is good news for investors who already own Melbourne apartments and it is also very good news for investors who invest in the Melbourne market before the 1 July deadline.
The market will adjust as it always does over time, however another positive likely impact for investors is that it will create an even more competitive second hand apartment market which should drive capital growth in comparison to houses which have outperformed apartments in terms of capital growth in the current cycle in recent years.
Grant Ryan, Ironfish Property Director