How stamp duty is keeping houses off the market
“When the transaction costs associated with the transfer of properties increase disproportionately in relation to the prices and incomes of the houses… this must then overwhelmingly discourage owners from moving. “
Stamp duty is just one of many taxes that distort prices and make housing – a basic need – increasingly unaffordable in Australia. But research shows that stamp duty, collected as a percentage of the sale price, has risen as median house prices have risen and pushed more homes into higher stamp duty brackets – a change Mr. Christopher called it a “creep of the rights slice”.
Like the prices themselves, the tax has also increased as a proportion of income – from 25.1% in 2012 to 34.3% this year – and up to 48.9% of income for homes in Melbourne and 46 , 3% for homes in Sydney, SQM figures show.
“We need to see reforms on several fronts,” said Mr. Christopher AFR weekend.
“We are in favor of replacing the stamp duty with a property tax. We believe this would improve liquidity and encourage those who may, especially later in life, reconsider staying in a very large house when that large house is not really optimal for their needs. “
There are variations between housing types and between states. Units are generally more liquid than homes because they are less expensive and are more likely to be bought and sold by investors than by homeowners, according to the study.
Liquidity was worse in cities with the biggest price increases since 2008, such as Sydney, Melbourne and Hobart. In Perth, housing market liquidity for units improved over the decade through March and only worsened slightly for houses, reflecting improved affordability in the state as prices have fallen.
The figures also clearly show that the stamp duty is not the only factor affecting liquidity. In the ACT, which began a 20-year process in 2012 to phase out the tax and replace it with a broader property tax, liquidity also deteriorated in the nine years up to August.
“The stamp duty burden in ACT has been reduced,” said Christopher.
“But this is the problem – the reforms did not go far enough. We believe that if you remove the stamp duty, you will see a change in the market. “
Reforming stamp duties – although recommended by the Productivity Committee in 2017 – is a politically and economically difficult process.
But even states that have proposed changes, such as NSW, are struggling. NSW stamp duties last year hit a record $ 9.7 billion, and he predicts that land transfer fees this year will exceed payroll taxes and become, at 31.6% of the total, the main source of tax revenue.
Victoria, the second largest state, went the other way in its latest budget, increasing the stamp duty on homes by more than $ 2 million.
Deep reform was likely to take time, and in the meantime, states should tackle the slippage of brackets in the stamp duty world, Christopher said.
“If we can’t move to a property tax-based system, we should consider changing the rates in different median price ranges, in the same way the federal government has adjusted pay-as-you-go tax rates as we go. as income levels have increased. ” he said.