First-home buyers in NSW will have a choice of paying upfront stamp duty or switching to an annual land tax, as the State Government starts a promised overhaul of transfer tax for residential property sales.

In a trend which is gaining momentum nationwide, NSW first-home buyers who choose not to pay stamp duty on the sale price at the point of purchase will instead pay a land tax fixed at 0.3% of the assessed land value plus $400 every year.

Premier Dominic Perrottet says the measure will make home ownership more affordable for FHBs and let more younger buyers enter the market as upfront costs will reduce.

For a home with a $1m land value, homebuyers opting for land tax would be exempt from $45,000 in stamp duty in favour of paying a $3,400 land tax a year.

The land tax “opt-in” scheme will spread some of the load of upfront housing costs – providing homebuyers accept they face an indefinite annual tax on the family residence.