Victoria's stamp duty changes, a sign of desperation
The Victorian Government's decision to immediately abolish stamp duty for brand-new properties signals a measure of desperation. Australia is in urgent need of new housing, and Victoria’s unemployment rate is among the weakest on the East Coast.
This initiative is designed to jump-start demand for brand-new properties, which has stalled in Victoria since the interstate migration driven by the pandemic and lockdowns.
Prior to the changes, Victoria's stamp duty regime was one of the most discouraging for investors, further compounded by land tax changes. The new rules aim to reverse negative sentiment and, in turn, help stimulate new housing supply.
Bottom line: These changes reflect a recognition that housing supply is at critical levels, and all available measures must be employed to reignite construction.
We believe the stamp duty changes, focusing on brand-new properties, could be mirrored by federal government actions on negative gearing tax policy. As the housing market cools and rate hikes take effect, governments will likely continue favouring new supply to stabilise the market.
Peter Esho is an economist and Founder of Esho Capital. He has 20 years of experience in investments and markets.