NSW Premier Dominic Perrottet is embarking on his long-touted stamp duty reform, by offering some first home buyers the choice of making the up-front payment or opting into an annual property tax.

The choice will be made available to first-time buyers purchasing a home up to the value of $1.5 million and will be announced during today's state budget.

If buyers decide to opt out of paying stamp duty, they will pay $400 plus 0.3 per cent of the land value per year.

Mr Perrottet has argued that stamp duty was an impediment for young people to getting into the market.

"We want to lower the barriers to owning a home for first home buyers seeking a place of their own," Mr Perrottet said.

"Lifting home ownership is part of this government's efforts and ambition to help families who are feeling the squeeze."

Once a buyer decides to pay the annual property tax, that property is locked into the scheme even when it is sold.

The state government has allocated $728 million in today's state budget over the next four years as part of its housing affordability package.

"It will mean more NSW residents will get into their first home at an earlier age and achieve the great Australian dream of home ownership," NSW Treasurer Matt Kean said.

The stamp duty announcement falls short of the reform Mr Perrottet has been pushing since he was treasurer.

He wanted 80 per cent of homes across the state to have the option of paying an annual land tax, and buyers would be eligible regardless of whether they were purchasing their first home.

But the Premier has previously conceded such large-scale reform couldn't be achieved without the help of the Commonwealth because of the loss of government revenue which is estimated to be about $2.5 billion per year.

Mr Perrottet has blamed the past Coalition government for failing to support the reform, while the new Labor government has flagged a willingness to tackle housing affordability. 

NSW Labor has stated its opposition to the move from stamp duty to a land tax.

"Dominic Perrottet has no mandate to charge families an annual land tax on their family home that will last forever," Shadow Treasurer Daniel Mookhey said yesterday.

The state government plans to introduce legislation later this year, so that the new first home buyer scheme can start from January 16, 2023.

The current stamp duty exemption for properties purchased by first home buyers that are less than $650,000 will remain in place.

The stamp duty reductions for first home buyers purchasing properties between $650,000 and $800,000.

The government says 55,000 people a year should be able to benefit from its first home buyers schemes.

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