Stamp Duty choking home buyers: HIA

Stamp Duty choking home buyers: HIA

2 February 2018

Australia’s peak building industry body, the Housing Industry Association (HIA), is calling for stamp duty reform after blaming the tax for choking new home sales in 2017, reports The Urban Developer.

The latest HIA Stamp Duty Watch shows stamp duty bills across Australia have almost doubled over the past four years, totalling $20.6 billion by 2015-16.

“Stamp duty bills have been sky rocketing for decades—in some cases by over 4,000 per cent since the early 1980s,” said HIA senior Economist Shane Garrett.

“The burden of housing taxes, particularly stamp duty, grew much heavier during 2017—homebuyers are really being squeezed.”

“[This] ever increasing tax burden has contributed to a drop in sales of detached houses by 5.7 per cent during 2017,” he added.

“Residential building activity contributes at least $103 billion annually to the economy. Construction employs over 1 million Australians. The persistent rise in the tax burden places this at risk.”

stamp duty hia

Source: HIA Stamp Duty Watch—Summer 2018

Mr Garrett said that increases in home prices cause stamp duty bills to accelerate because stamp duty rate brackets are rarely updated, a trend that will continue until stamp duty is reformed.

“This is the problem of stamp duty creep,” he said.

“Total stamp duty revenues have almost doubled over the past four years: from $11.7 billion in 2011/12 to $20.6 billion in 2015/16 – most of which is likely to have come from residential building, said Mr Garrett.

The HIA claims stamp duty bills eat into homebuyer deposits, requiring them to settle for smaller homes or else take on bigger mortgage loans.

In this way, stamp duty increases mortgage repayments by $1,247 per year—equivalent to over $37,000 over a 30-year loan term.

The latest HIA New Home Sales report reveals Victoria was the only state to experience an increase in the sale of new houses (+5.8 per cent) during 2017.

The largest reduction occurred in NSW (-14.5 per cent) followed by Queensland (-14.1 per cent).

There were also falls in new house sales in Western Australia (-8.8 per cent) and South Australia (-2.7 per cent) during 2017.

Professor Hal Pawson from UNSW’s City Futures Research Centre told Fairfax media a broad-based land tax would be a more efficient and fairer method of revenue-raising from homeowners.

“Firstly, it encourages more productive use of property and the land. If you’re paying a land tax that will be set according to the size of your home or the amount of land your home is on,” Mr Pawson said.

He said it also encouraged baby boomers to downsize as well as encouraging developers to develop and release land quicker instead of holding on to enormous amounts in land banks, waiting for property values to rise.

“It would discourage speculation and in fact would help moderate property prices,” Mr Pawson said.