Key parts of the Andrews Labor government’s housing affordability package came into effect on July 1. From Saturday, first-home buyers in Victoria will no longer have to pay stamp duty on properties valued up to $600,000, and will pay less stamp duty on properties valued up to $750,000.

In contrast, investors will now have to pay stamp duty on the full value of the property, not just the land value, when purchasing off-the-plan.

While these measures are supposed to help first-home buyers, in practice they will mainly help those who already own property in city fringes and in regional areas, according to the Grattan Institute’s John Daley and Brendan Coates.

“Even though buyers hand over the stamp duty cheque, in effect, sellers pay most of it. When buyers pay less stamp duty, they’re prepared to pay more for the property,” they said.

Many buyers of new houses in city fringes are new to the property market. As they are now largely exempt from paying stamp duty, they’ll be prepared to pay more for their homes, which in turn would boost house prices in the city fringes. This spells good news for outer suburban homeowners and developers, according to Daley and Coates.

“Some first-home buyers will win out if they are mainly competing with investors or second-home buyers – as is typical in the middle rings of Melbourne. But good luck finding a home there for under $750,000,” they said.

Homeowners in regional areas will benefit too. “The first-home owner grant has been increased for the next four years from $10,000 to $20,000 for new homes built in regional Victoria and valued up to $750,000,” Daley and Coates said.

While the grant will boost the price of regional homes, don’t expect more Victorians to head to outlying areas. Since most new jobs are located in the service industries (for which close proximity to Melbourne’s CBD is vital), many Victorians will continue to live near their jobs.

In contrast, developers and owners of existing inner-city apartments are likely to be negatively impacted by these changes. “The changes will increase the stamp duty paid on apartments that are mainly purchased by investors. They will be prepared to pay even less for inner city apartments, the prices of which are already under pressure,” Daley and Coates said.

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