Deteriorating housing affordability was a key focus of the federal budget, seeking to alleviate some of the pressures for those looking to buy or rent currently face.
But stamp duty reform was not one of them.
Many experts agree that support for the states to transition from stamp duty to a broad-based land tax must be seriously explored if we hope to create a strong structural foundation for an efficient and equitable property market.
Stamp duty reform is needed to allow the property market to function more efficiently in all states.
Some of the issues identified with stamp duties are that they increase the cost of housing, increase the deposit burden and disincentivise household mobility.
Stamp duty is an inefficient tax that acts to slow the property market, reduces economic growth and makes housing less affordable.
The former NSW Treasury estimated that eliminating stamp duty could unlock something like $10 billion in economic value.
State governments replacing stamp duty with an annual land tax would help to better utilise the available housing stock.
Stamp duty makes it harder for many first-home buyers to buy a home because it is an upfront additional cost on top of the deposit you have to save. In Sydney it takes 7 years to save a 20% deposit for an entry-level home. In Melbourne and Hobart, it takes about 6 years.
Stamp duty adds to this deposit hurdle, including adding an extra year of saving in most cities for a relatively affordable home.
State governments already recognise the impact of stamp duty on first-home buyers; that’s why most states offer stamp duty concessions or waivers for first-home buyers.
Home ownership rates have been declining among younger, lower income Australians for decades. Reducing up front purchase costs for first-home buyers by replacing stamp duty with an annual land tax, would reduce the deposit hurdle for first timers and allow many to purchase sooner.
Stamp duty also discourages rightsizing, with many “empty nest” households not needing as much space as they have. But they keep it because downsizing is unattractive due to the size of transfer costs.
The big barrier here is stamp duty, which adds to the cost of downsizing, promoting inefficient use of existing housing stock.
But stamp duty is also a barrier to moving in general, for example, for a new job.
Reforming stamp duty could not only help younger households and improve housing affordability, but also better utilise Australia’s existing dwelling stock. A clear win in the face of a growing population and existing housing shortage.