Victoria’s housing market is at a tipping point, grappling with a chronic supply shortage, skyrocketing prices, and a rental crisis that’s left many scrambling for solutions.
In response, the Victorian Government has rolled out a bold overhaul of stamp duty rules for off-the-plan apartments, townhouses, and units—changes that could make a real difference for buyers and investors alike.
By slashing upfront costs and expanding eligibility to all buyers, including investors, these reforms aim to breathe new life into the property market, stimulate much-needed construction, and make housing more accessible.
But with rising construction costs, labour shortages, and a persistent gap between new and existing property prices, will these changes be enough to shift the dial?
Let’s dive into what these stamp duty changes mean for buyers, developers, and Victoria’s housing market—and explore whether this is the game-changer the state desperately needs.
What’s changed?
Stamp duty concessions on off-the-plan purchases previously applied to first-home buyers and owner-occupiers who can subtract the construction costs from the price of a property to reduce the stamp duty owed.
However, these concessions had strict value thresholds:
- First-home buyers: the value of the property had to be less than $750,000.
- Owner-occupiers: Property value must not exceed $550,000.
- Overstepping these limits resulted in the loss of the concessions.
These are some of the barriers removed by new stamp duty changes that offer a more inclusive and generous concession.
Key updates to include in your presentation are highlighted below:
- Expanded eligibility: The concession now applies to all buyers, including investors.
- Even more value for your money: buyers can deduct 100% of the cost of construction and renovation while determining the stamp duty payable.
- Wider price range: There are no thresholds on property value, so it is a concession irrespective of the price.
For example, a buyer who buys a $620,000 off-the-plan apartment would save roughly $28,000 in stamp duty if the property is purchased before construction commences.
Instead of paying $32,000, the duty is reduced to a mere $4,000.
The upside for buyers
These changes are intended to make market entry more accessible.
With housing affordability now at the lowest it has been in decades, smaller upfront costs could enable more Victorians to buy sooner.
But to investors, this is even more attractive.
New properties offer the maximum depreciation benefits, and the mere inclusion of investors in this concession may result in much-needed activity in the rental market—where supply is critically constrained.
Off-the-plan properties are in vogue because the focus on them develops in line with urban planning goals, often encouraging higher-density residency with better land and infrastructure usage.
As Eleanor Creagh, a Senior Economist at PropTrack, explains:
“These changes provide welcome support for buyers, particularly in Victoria’s inner suburbs, where higher-density housing is crucial to meeting housing needs and improving affordability.”
Challenges for developers
While the concessions are likely to spur demand, there are still considerable barriers on the supply side.
The residential construction industry in Victoria continues to face:
- Labour shortages
- Rising material and financing costs
- Compressed profit margins
These factors have led to delays and the scrapping of high-density projects, which in turn reduces the available supply.
The price premium between new and established apartments has grown significantly, making existing homes more attractive to buyers.
The median price premium for new apartments over second-hand ones reached 44% in September 2024 for inner Melbourne, for example—a difference of $250,000.
This premium has surged 29 percentage points in just one year.
Creagh says:
“The premium price for new apartments over established ones reflects cost escalations in construction and finance.
For developers, this presents considerable challenges in achieving the pre-sales necessary to obtain finance for new projects.”
Opportunities for investors
It is also a strategic move to include the investors in the stamp duty concession.
The fact is that many investors can always prefer new properties for the depreciation benefit.
A reduced stamp duty may, therefore, help reinvigorate investor interest in Victoria’s apartment market.
This is particularly crucial for increasing the rental supply since investors are the key players if the present rent crisis is to be assuaged.
However, as Creagh identifies:
“The concessions are a step in the right direction, but more is needed to address the broader cost pressures impacting economic feasibility of High Density Developments.”
What this means to the market
That’s a great step toward overhauling stamp duty, but it doesn’t solve all the housing challenges of Victoria by any far stretch.
While upfront costs for buyers are reduced, possibly starting to kick-start projects that have gone to a halt recently, the systemic issues of the system remain:
- With construction feasibility, the cost of new builds must come down or the prices from established properties have to go up in order for the premium to shrink.
- Planning reforms: Streamlining approval processes could fast-track developments and reduce delays.
- Labour and material costs: Shortages and high costs can be overcome only by an integrated action on the part of government and industry.
A step in the right direction
These changes mean that buyers can achieve a rare double, reducing costs to access the market or for those into new builds or maximizing rental returns.
Developers are hopeful that buyer demand will equate to the better financial viability of new projects and help ease housing shortages.
As Creagh concludes:
“These changes will stimulate demand and encourage development, but broader reform right across the supply chain is needed if Victoria’s chronic undersupply of housing is to be tackled.”
Changes to stamp duty were steps in the right direction, but the journey of balance and sustainability in the housing market would need more time and effort.
