The Hunter region has had a 66% increase in land values since July 2021 – the largest increase of any region in NSW. The second largest increase was felt by the Murray region with 52.8%. The increase in land values has a significant impact on land tax, payable by property investors, but it also affects property tax which is a critical component of the latest First Home Buyers Choice touted by the Perrottet government to aid first home buyers. It also has ramifications with the calculations of council rates.
Experts are warning buyers to calculate the land or property tax payable on any prospective purchase as the increased land values have the potential to blow out the family budget. Caused by a tight land supply and a back log of new housing, land values have soared an average of 26% overall. Regions have experienced the highest increases due to a flow of people moving out of the urban city areas as an effect of the pandemic.
What is Land Value?
Land value is the market value of your property in an unimproved state without any structures. It is the value of the land only. It is calculated each year on 1st July and the Valuer General will use the average of the previous two years combined with the current year to set the final value. Land values are used to set council rates and calculate land tax. Councils receive new land values every three years and set rates accordingly.
What is Land Tax?
Revenue NSW sends out a land tax assessment notification each year for properties that you own as of 31st December. Your primary residence is exempt from land tax. Land tax is payable on the value of the property over the threshold. The threshold in 2023 is $969,000. It is calculated as $100 + 1.6% of the land value over the threshold ($969,000).
How Land Value Affects First Home Buyers Choice
The NSW government is currently giving first home buyers the choice between paying stamp duty up front or paying a property tax each year. The property tax is determined by the land value and is set as $400 + 0.3% of the land value with rises capped at 4%. Property tax rates will be annually indexed by Gross State Product per capita to ensure that average payments grow in line with average incomes.
Choosing whether or not to pay stamp duty upfront or an annual property tax depends on a lot of factors including how long you intend to own the property. If it’s your forever home, you may want to consider upfront stamp duty as a once off payment rather than paying property tax ‘forever’ which will be influenced by land values that go up and down over time.
Learn More
To learn more about your land value or property information, visit www.valuergeneral.nsw.gov.au where you can explore interactive land value summaries and property sales comparisons.
If you’re considering a new purchase, our Walkom Sales Agents are the experts in property and can help guide you through the best options in these changing times. Contact us today.