Off-the-plan duty shock for apartment buyers
CURRENT transfer duty rules for off-the-plan purchases favour house and land packages and create a disincentive to buying an apartment, according to the Real Estate Institute of WA (REIWA).
“Apartments sold off the plan are liable for transfer duty on the full sale price of both the land and apartment, whereas house and land packages are typically only charged transfer duty on the land component,” president Hayden Groves said.
“Not only does this create a disincentive for buying an apartment, it places an unfair financial burden on those buyers who do choose to purchase off the plan.”
At current rates, the transfer duty fee applicable to a house and land package of $564,500 would be $7315, while the fee for an off-the-plan apartment of the same value would be $21,170.75 – a difference of more than $13,000.
A recent REIWA survey of WA property seekers found 64 per cent of the 122 respondents would be more likely to buy or invest in off-the-plan apartments if transfer duty rates were amended to be more in line with house and land packages.the survey also found 62 per cent of respondents considered affordability the biggest housing issue for our changing population.
As part of its campaign to put property issues on the political agenda, REIWA is advocating for a 50 per cent concession to transfer duty for off-the-plan purchases.
“As WA grows and the population demographics of our state change, we are going to need more diverse housing solutions to better suit the needs of our community,” Mr Groves said.
“Incentivising off-the-plan apartment sales by aligning transfer duty rates with house and land packages will help improve affordability for West Australians seeking alternative housing options and re-balance the available stock by adding more diversity to the market.”
REIWA scenario analysis found if a 50 per cent concession on transfer duty for off-the-plan apartment purchases were to be applied, there would be a short-term loss for the State Government of up to $12.3 million.
However, ultimately, it could generate a net growth of up to $9.2 million if sales increased by seven per cent.
“We are calling on all political parties to commit to improving housing affordability and diversity in WA, by creating an even playing field for buyers and investors wishing to purchase off-the-plan apartments,” Mr Groves said.