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RBA Interest Rates, Stamp Duty, and the Australian Property Market

First-time buyers and seasoned investors in the property market are concerned about news regarding the RBA interest rates and stamp duty charges. With the changes being established in both monetary policy and fiscal policy, how do these affect the property market in Australia? Guest and property market specialist Mario Bertone breaks down the effect of RBA rates and what the stamp duty actually does to property prices.

What are RBA Interest Rates?

The Reserve Bank of Australia, or the RBA, is the bank of banks. That is, the RBA lends money to the banks at a particular cash rate, and this cash rate is the banks’ basis for their own rates. The RBA reviews their cash rates every month to safeguard the Australian economy. As a result, cash rates are fluctuating. It is the banks’ prerogative to match the changing RBA cash rates or maintain their rate regardless of the changes. Such is the relationship of the RBA with the banks and your mortgage interest rates.

What are stamp duty charges?

Stamp duty, otherwise called general duty or transfer duty, is the tax charged on written documents for specific transactions. For example, leases, mortgages and transfers of property are all taxable. The rate of the stamp duty varies in every state. Stamp duty for a home worth AUD 600,000 in Melbourne may cost either more or less than stamp duty for a home of the same value in Sydney.

Each state has a first-time buyer scheme aimed at helping a first-time buyer get into the property market. If you’re a first-time buyer, you will be offered benefits depending on which state you are in. Some states waive the stamp duty entirely, while some states charge first-time buyers lower or through an instalment plan.

Whatever the case, when put in comparison with international stamp duty, stamp duty in Australia is significantly lower. In fact, many international investors are looking to Australia for investments, particularly in residential property for retirement or education.

How does it affect the Australian property market?

The property market is a competitive market. It is important for investors to educate themselves on lenders and banks and what their attitudes are in response to RBA cash rates. As for whether this affects the Australian property market, the more that government officials try to slow down the economy, the more the prices go up.

Guest and property investment specialist Mario Bertone points out that each time a first-time buyer scheme is introduced, prices go up. This is because various sectors want a portion of it – totally defeating the purpose of the scheme which is to help the first-time buyer get into the market.

There needs to be an intentional meeting of the minds to create a solution for this growing concern. Even as the market eventually balances itself out, politics and biases have to be set aside to push it in the right direction.

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