Victorian Premier Jacinta Allan has announced a year-long expansion to the state's off-the-plan stamp duty concession, making it available to all buyers regardless of a property's value. 

The concession allows buyers to deduct construction costs from the dutiable value of a unit purchased before or during its construction, thereby reducing the stamp duty payable.

For example, if you purchased an apartment for $500,000 before building works had begun and construction was expected to cost $400,000, stamp duty would only be applied to the remaining $100,000 of your purchase price.

Previously, the concession was only available to first home buyers and owner-occupiers, with caps of $750,000 for first home buyers and $550,000 for owner-occupiers after construction costs.

As of 21 October, the off-the-plan duty concession is available to all owner-occupiers and investors, with most expected to save around 75% on stamp duty, depending on how close the property is to completion at the time the contract is signed.

"We asked industry what they need to build more homes sooner, and this is what they said," Ms Allan said.

"More apartments and townhouses getting built means more homes for young people and families to rent or buy."

To be eligible, the property must have a strata title, meaning buyers of freestanding homes or house-and-land packages are unlikely to benefit from the discount.

See also: Stamp duty calculator

The announcement coincides with the expansion of the Victorian Government's 'activity centre' program, which seeks to deliver 300,000 new homes in Melbourne areas with strong public transport links.

The initiative aims to streamline the planning approval process for developers, removing barriers that can otherwise delay construction.

Victoria's latest stamp duty move comes after Queensland eased the tax burden for first home buyers, lifting value thresholds for entry into the market earlier this year.

First home buyers could benefit from increased supply

While CoreLogic head of research Eliza Owen warns a surge in high-density developments could risk creating a supply glut in Melbourne, she acknowledges these properties may offer downsizing opportunities for empty nesters, potentially freeing up larger family homes.

The increase in supply, coupled with expanded stamp duty concessions, could also help more first home buyers enter the market.

"Historic lending data from the Australian Bureau of Statistics shows that the biggest surges in first home buyer activity have occurred during temporary, uncapped buyer concessions, because they concentrate first home buyer activity under the period the concession is available.

"This actually does serve to improve the feasibility of unit projects in the areas earmarked for upzoning.

"Even without the stamp duty concession, younger Australians would likely be incentivised to take up unit living because of the cost blow out between houses and units through the pandemic."

More needed to encourage housing construction: HIA

The latest announcements from the Victorian Government were also welcomed by the Housing Industry Association (HIA), which labelled stamp duty an "inefficient" tax.

However, the HIA cautions more action is needed to meet the state's target of building 800,000 new homes.

"The industry continues to face a number of significant challenges in boosting housing supply," HIA executive director of Victoria Keith Ryan said.

"This includes the costs and time associated with delivering the key 'last mile' enabling infrastructure to get projects shovel ready faster, the continuing raft of cascading regulatory changes, outdated home building contract laws and increasing costs and decreasing availability of insurance."

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