Some could live in their property for 63 years and still pay less than they would paying upfront stamp duty, according to NSW Treasury analysis.
That figure is for a first-home buyer purchasing a $1.5 million unit.
More realistically, "under reasonable assumptions", the Treasury analysis still shows those who opt for annual land tax will save money for more than 20 years.
Premier Dominic Perrottet wants to start a trial in January of an optional land tax for first-home buyers.
It would allow them to avoid the high upfront cost of stamp duty, and the property would not be locked in to the tax if sold.
Legislation to create the scheme has passed the parliament's lower house but is subject to an inquiry before the upper house votes on it.
Treasury's submission to the inquiry highlights that home ownership rates are falling and choice is a key feature of the proposed scheme.
It notes the option to pay land tax rather than stamp duty "is not expected to have any noticeable effect on home prices, but it is expected to increase home ownership", because it favours owner-occupiers over investors and removes the stamp duty "deposit barrier", allowing first homebuyers to purchase sooner.
Premier Dominic Perrottet blames the Labor opposition for the bill's delay.
"Stop blocking the opportunity for young people to get into their very first home," he said on Monday.
Labor has criticised the proposal and called for it to be delayed until after the March election.
The scheme will place a 'forever tax' on the family home and cost the government revenue, Labor says.
"What we're seeing from Labor is a scare campaign based on lies," Mr Perrottet said.
The scheme makes sense and will benefit first homebuyers who opt for it, he said.
Purchasers paying land tax on an $800,000 unit would be even with upfront stamp duty costs after 36 years, a $1 million townhouse after 28 years, and a $1.25 million house after 26.
Treasury's calculations have tax rates indexed to grow at the same rate as gross state product per capita (which was 3.2 per cent annually in the 15 years to June 2021).
Its analysis also uses an average 5.6 per cent mortgage rate, taken from the same 15-year period, and assumes different land values for houses (60 per cent), townhouses (50 per cent) and units (35 per cent).
Prior analysis has shown half of all owner-occupiers sell their property within 10.5 years and about two-thirds within 20.
Stamp duty exemptions and concessions already available for first homebuyers purchasing a property under $800,000 will continue, and the proposed scheme includes properties up to $1.5 million.
The NSW Tenants Union supports land taxes, with chief executive Leo Patterson Ross last week telling the upper house inquiry it discourages land-banking and intentionally vacant properties.
McKell Institute chief executive Michael Buckland said the scheme does not go far enough.
Instead, all homebuyers should be offered the land-tax choice, and then the property should be locked in to the tax to gradually transition all homes, Mr Buckland said.
The committee is expected to report on its inquiry by Friday.
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