The ACT's Chief Minister has put the onus on developers to build more properties under $500,000, claiming cuts to stamp duty would help them to do that.
Andrew Barr said changes to stamp duty, which will see the tax removed for all off-the-plan properties under $500,000 would help inject more supply into the market.
But the ACT's opposition slammed the "smoke and mirrors" move saying the stamp duty cut was insulting to Canberrans.
Opposition Leader Elizabeth Lee questioned what impact the move will have given stamp duty exemptions for first-home buyers, who were most likely to buy off-the-plan properties under $500,000, have been in place for a number of years.
The off-the-plan stamp duty exemption was initially part of a temporary stimulus measure in response to the coronavirus pandemic, but Mr Barr has made the measure permanent.
It will mean all owner-occupiers no longer need to pay stamp duty on off-the-plan apartments and townhouses under $500,000 in the ACT.
However, first-home buyers have been exempt from paying stamp duty in the territory since 2019, provided they have a yearly household income of less than $160,000.
Prior to that, first-home buyers also received stamp duty concessions for off-the-plan properties under $607,000, including an exemption from the full stamp duty cost for properties under $470,000.
But Mr Barr said the move was targeted at growing the supply of affordable housing.
"This is an initiative aimed at the supply of new housing, it's not just about what's in the market today," he said.
"Sending a very strong signal to the development industry to supply more new housing below $500,000 to get the maximum benefit from the tax cut."
Mr Barr said a quick scan of the market showed there were one- and two-bedroom units for under $500,000 but he urged developers to build more products in this price range and even slash the prices of existing stock.
"Let's have more properties: one-, two- and preferably even three-bedroom under $500,000," he said.
"A quick scan of the market at the moment shows that there are some two-bedroom properties priced at $505,000 or $507,000.
"It would be very smart of those developers to drop that price to $499,000 to take advantage of the stamp duty cut - they might see that those properties would sell."
Ms Lee questioned how many Canberrans this would actually benefit, saying the scheme was restrictive.
"This is clear that this is just a political point that this government is making," Ms Lee said.
"It sounds great on paper but when you actually delve into the detail it is nothing of substance.
"When you look at the current market, with the average home in Canberra at almost double the $500,000 you really need to wonder how many people it is going to benefit."
Cuts to stamp duty form a large part of the ACT's 20-year tax reform program to reduce duties and replace them with higher rates.
The stamp duty announcement came days after Mr Barr announced stamp duty would increase by 3.75 per cent for the average Canberra household and that pandemic rates rebates would not continue.
"It's a bit of a slap in the face to hardworking Canberrans," Ms Lee said.
"We are still in the middle of a pandemic and there are many many Canberrans that are still struggling ... and for this government to impose a 3.75 per cent increase in rates after having tantalisingly dangled the proposition that there may be some relief is just cruel.
"In addition to this, for this government to come out with a smoke and mirrors fanfare about abolishing stamp duty is just insulting."
The ACT's property industry welcomed the stamp duty changes but urged the government to go further.
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Property Council ACT executive director Adina Cirson said the territory was facing a supply crisis with demand outstripping supply.
"There needs to be a watch and act component with the [stamp duty changes]," Ms Cirson said.
"We are really urging the government to keep an eye on this because the amount of product under $500,000 is limited."
Master Builders ACT chief executive Michael Hopkins said it was "incredibly difficult" for developers to build properties under $500,000.
He said the industry was trying to deliver a cheaper product and the ACT government could do more to make land cheaper, which he said was a barrier to affordable housing.
Mr Hopkins said the $500,000 threshold could also be increased.
"With ACT house prices increasing rapidly, the $500,000 threshold should be increased to meet the realistic cost of housing in the territory," he said.
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