The increasing impost of stamp duty is restricting the number of properties that come onto the market, contributing to record-high prices as buyers compete for tight supply.
As prices rise, more properties are pushed into higher-bracket stamp duty bands, exacerbating the trend.
If stamp duty was replaced by an annual land tax, one of the barriers for those looking to downsize later in life would be removed, boosting supply, says SQM Research in a report: Stamp duty: the relationship to Australian housing affordability and supply.
The report shows how the rising cost of stamp duty has fostered reduced property listings for more than a decade.
Louis Christopher, managing director of SQM Research, says there has been an ongoing decline in the number of listings, despite steady increases in the total numbers of dwellings being built across Australia.
In 2008, up to 4.5 per cent of all residential properties were available for sale; today the percentage is less than 2.5 per cent, says the report, which was commissioned by the Real Estate Institute of Australia (REIA).
‘The long-term decline in listings fundamentally represents a shortage of real estate, which is a contributing factor to the surge in prices.’
Louis Christopher, managing director of SQM Research
“The long-term decline in listings fundamentally represents a shortage of real estate, which is a contributing factor to the surge in prices,” Christopher says.
Adrian Kelly, president of REIA, says stamp duty remains a prohibitive tax, adding tens of thousands of dollars to the purchase price of a home.
“Stamp duties as a percentage of average national earnings have jumped over the past decade to 34.3 per cent, from 25.1 percent in 2012 – up almost one-third”, Kelly says.
Stamp duty of $40,207 is paid on a $1 million property purchase in New South Wales, and $55,000 on a purchase with a “dutiable value” of $1 million in Victoria.
CoreLogic data for September showed Sydney house prices up 25.8 per cent since the year began with the median value now at $1.3 million. In September alone they increased by $18,000.
Melbourne prices have climbed 16.2 per cent since January 1 with the median value now at $962,250 after adding another $7750 last month.
A $2 million property in NSW attracts stamp duty of $94,567 and $110,000 in Victoria. States and territories have various stamp duty concessions for first home buyers.
In some cities, the news is not so bad. In Perth and Canberra, where stamp duty as a proportion of average wages has reduced or not risen much, there has not been as marked a deterioration in the availability of properties listed for sale.
Stamp duty creates economic distortions, according to former treasury secretary Ken Henry in a review of the tax system a decade ago. His report recommended replacing the impost with an annual land tax.
The NSW government has floated the idea of introducing a land tax. The proposal would see property purchasers given a choice of either paying a lump sum stamp duty, or paying a smaller, ongoing annual property tax.
Stamp duty on property purchases is being phased out in the Australian Capital Territory.
A report from the National Housing Finance and Investment Corp., released in July, favoured replacing stamp duty with land tax.
It said retirees and low-income earners could be paid a rebate on any land tax liability.
The report said a move to annual land tax would “likely lift dwelling prices in the short-term, as the removal of transfer duty is capitalised into prices.”
“However, if lenders fully capitalise the cost of the replacement land tax into loan serviceability criteria, the price impact from removing duty [over the short-term] may be negligible.”
Article Source: www.brisbanetimes.com.au
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