The November State Budget included welcome news for investors, vendors and agents with significant changes to land tax and stamp duty.
The government announced a 50 per cent discount for eligible build-to-rent developments, including an exemption from the absentee owner surcharge until 1 January 2040. The expected start date is the 2022 land tax year.
The treasurer also announced a stamp duty waiver of up to 50 per cent on purchases of residential property in Victoria valued up to $1 million. The waiver applies to contracts entered into on or after 25 November 2020 and before 1 July 2021.
KR Peters Director Peter Nicolls said the changes, coupled with the Cup Day interest rate cut, will further fuel an already hot real estate market.
"The recent interest rate cut of .15 per cent wasn't that big a cut, but it was psychologically the cut that broke the camel's back. It has given people confidence to go out and buy at historically low rates. And buyers have the confidence to know rates will stay low when the banks said rates are unlikely to rise for at least 3 years," Mr Nicolls said.
Just three weeks after the latest rate cut, the budget announcements have changed the real estate landscape in Victoria yet again.
Mr Nicolls describes the build-to-rent announcement as a "huge incentive".
On land valued at $1 million dollars, an investor could pocket savings of $5,500 to $6000 per year.
The government hopes the measure will boost housing stock and in turn keep rents stable.
"This announcement will encourage people to invest and in turn will keep rents from escalating. If investors can minimise their land tax bill it will encourage them to build and hold," Mr Nicolls explained.
Mr Nicolls welcomed the temporary stamp duty concession, but warned it would put further pressure on builders who were already nearing construction capacities.
"Home builders have filled their books with contracts that have far surpassed their projected quotas," Mr Nicolls warned.
"The builders now have to construct the dwellings."
He said a shortage of skilled tradespeople could become acute as demand escalates.
"We were already experiencing a shortage of bricklayers and concreters and finding quality trades to meet the demand will become challenging.
"The ability of companies to cope with the supply of building materials will also become a major factor."
He warned construction delays could occur if builders experience difficulties securing trades or supply.
"From past experience when demand becomes so strong trades raise their prices and suppliers run out of stock. This then causes prices to rise.
"These budget announcements have certainly added fuel to an already rising market.
"Prices are rising so fast agents aren't even quoting comparable sales from six months ago because prices have already gone up 10 per cent or more.
"The train has left the station at full speed and it's not stopping."