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The stamp duty on housing has become an added obstacle to those wishing to enter Sydney and Melbourne’s property market, compounding the effect of higher asking prices, researchers have warned.
Commenting on the latest CoreLogic Property Pulse, head of research Tim Lawless highlighted that - based on the median dwelling value across each capital city - stamp duty estimates can range from $32,680 in Melbourne to $9,000 in Brisbane.
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Mr Lawless noted that the system can be quite confusing due to “significant differences” regionally, as well as the complexity of rules, concessions and limits that are applied to the calculation of stamp duty, particularly in the country’s two largest cities.
“Because stamp duty costs are percentage based, as dwelling values move higher, stamp duty costs can rise disproportionately faster due to bracket creep,” he said.
“Over the past five years dwelling values in these two cities have increased by 62 per cent and 38 per cent respectively, which implies at least a commensurate rise in stamp duty costs in these cities. The high transactional costs associated with housing are likely to be one factor that is contributing to a slowdown in the number of sales across the country.”
Mr Lawless explained that stamp duty costs, and the fact that most lenders seek a 20 per cent deposit on property, present “substantial” barriers to entry for home buyers.
He added that if transaction numbers across the housing market continue their downward trend, it would be likely that state governments could encounter a “budget hole” as stamp duty revenue falls.
“For this and associated reasons, we may find state governments become more serious about considering a broader based land tax that is applicable to all property owners rather than a stamp duty that is payable only across the small percentage of properties that transact each year,” Mr Lawless concluded.
Stamp duty costs Aussie families $1,200 a year
Mr Lawless' comments follow on from the latest Stamp Duty Watch report from the Housing Industry Association (HIA), which found that stamp duty is costing the typical Australian family over $1,200 in additional mortgage repayments yearly, or $100 every month.
Commenting on the findings, HIA senior economist Shane Garrett remarked, “The burden of stamp duty has grown much heavier during 2016, with strong dwelling price growth translating into disproportionately larger hikes in the stamp duty bill for homebuyers.”
He added, “Stamp duty is now setting ordinary homebuyers back by an average of $19,975. This eats up home purchase deposits and forces families to take on much larger mortgages, with total loan repayments typically rising by around $36,000 over a 30-year term. The cost is even greater when the impact of the higher Lenders’ Mortgage Insurance premiums is added on top.”
Mr Garrett pointed out that stamp duty costs are not only presenting a barrier to entering the property market, but are also presenting a barrier to families in terms of employment mobility and retirement downsizing.
“A plan for its removal needs to be at the centre of a national housing affordability strategy. The large states’ coffers have benefitted heavily from the stamp duty windfall in recent years. Perhaps now is the time to offer some relief,” he said.
[Related: NSW government admits stamp duty ‘inefficient’]
