The big difference between buying a house and a new pair of shoes is obviously the price -- and for good reason. Boots may be for walking, but buying a house means waving bye-bye to the landlord while building equity, wealth, security and stability with the soundest investment you'll ever make.
However, national house prices are on the decline, credit supply has tightened, investor and owner-occupier demand is easing, and purchase sentiment is taking a hit with negative media coverage.
Yet another worry? Tax.
What we pay in property tax affects how we decide to buy, sell and own property. So it's crucial to know and understand the major taxes in play in the Australian property market.
1. Capital Gains Tax
The difference between what you buy and sell an asset for is either a capital gain or a capital loss.
You don't pay capital gains tax (CGT) on most things, including your main residence, your car and your personal belongings. But land, holiday houses, rental properties and business premises are subject to CGT.
2. Stamp Duty Tax
The price and the deposit aside, the biggest cost when you buy property is the stamp duty.
Each state sets its own rates, but in every case it is the property value that determines the amount. Stamp duty can take buyers by surprise, as it's rarely mentioned until the state is ready to take those thousands of extra dollars.
3. Land Tax
Unless you live in the Northern Territory, land tax could apply if your property is above a certain value threshold.
But unlike the one-off stamp duty, land tax is payable each year based on the 'unimproved value' of your land. Main residences are generally exempt, meaning land tax affects investors more than owner-occupiers.
4. Foreign Purchaser Tax
Our great and well-regulated country makes Australia attractive to foreign investors. So with that sort of investment on the rise, various state governments have introduced extra surcharges.
The rules vary for land, but foreign purchaser tax applies across the board when a foreign person buys residential property in just about every state.
The final word: It's time to buy a house!
Notwithstanding the challenges facing the market at present, real estate continues to stand on firm ground thanks to strong jobs growth, a solid economy, an unemployment and interest rates at historic lows. It is a great time to buy a house!