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Reforming stamp duty, increasing housing supply and further extending home-buyer assistance would help housing affordability, according to REA Group.
In a submission to the House of Representatives standing committee on tax and revenue’s inquiry into housing affordability and supply, REA Group has recommended a few areas for reform.
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Stamp duty was the first area of attack, with the company calling it an “inefficient tax that slows the property market”.
“Stamp duty is levied on property transactions and as such acts as a disincentive to liquidity in the property market,” REA stated.
“As stamp duty payable has increased over time, it has become an obstacle to households being able to move, as the added cost of stamp duty on a new purchase is a disincentive. This is in turn discourages labour mobility which is a key drive of economic productivity.”
The NSW government has flagged intentions to allow home buyers to opt out of stamp duty and to instead pay a smaller annual property tax.
At the same time, the ACT has transitioned from stamp duty to a broad-based property tax, while Tasmania has introduced concessions for first home buyers, as well as pensioners looking to downsize their properties.
The National Housing Finance and Investment Corporation (NHFIC) also signalled it is in support of removing stamp duty, with its research finding the reform would lead to more efficient use of housing stock and reduce volatility for state and territory revenue.
“REA’s position is that stamp duty reform is urgently needed to allow the property market to function more efficiently,” the submission from REA stated.
“REA fully supports the NSW government’s reform process and urges other jurisdictions to look at following suit.”
Local governments called to up supply, density
Increasing housing supply was also suggested as a key factor in managing price rises, however, REA stated the considerable time lag in constructions means it is a medium to long-term solution.
“There is significant scope for governments at all levels, but particularly local governments, to reduce the planning impediments to the increase in housing supply,” REA stated.
“In many cases local governments have the power to redevelop for increased density, which will increase supply and ensure that price growth is at a slower level.”
State and local governments could also make planning requirements less complex, the submission argued.
Expand home-buyer schemes
The group called for the government to expand its First Home Loan Deposit Scheme further, following its recent expansion from 10,000 places to 30,000.
The scheme allows first home buyers access to a home loan with as little as 5 per cent.
“The increase in house prices has also led to deposit requirements becoming significantly more onerous for buyers,” the submission read.
Similarly, the group said it would support an expansion of the Family Home Guarantee.
Another option was to consider the capital treatment of loans by APRA, which makes loans with a high loan-to-value ratio (LVR) more expensive.
“If capital requirements were recalibrated based on borrower risk, it is unlikely that the 80 per cent level that is currently held would continue,” REA declared.
Concerns around public housing
Further, REA observed an ongoing decline in public sector dwelling construction, pointing to Australian Bureau of Statistics data that showed in the mid-1980s, a tenth of all dwelling approvals were for public housing. In recent years, the proportion had fallen to 2 per cent.
The submission expressed concerns around another parliamentary inquiry finding the average and lower-income households were being pushed to the city fringes, where poor access to employment, critical infrastructure and services reduced the quality of life and increased social disadvantage.
“Compass Housing Services released a report in August 2021 saying that a shortfall of almost 200,000 homes in the social housing sector by 2031 would occur unless the federal government begins investing now,” REA stated.
“Under current projections, all states and territories are planning to build just 66,000 new properties.”
Increasing public housing supply would also create construction jobs and provide economic stimulus for Australia’s recovery from the pandemic, REA said.
It explained: “In the current economic environment, with low interest rates, there is an opportunity for governments to invest heavily and change the lives of the most vulnerable members of our community.”
The housing affordability inquiry had its first hearings last week, where it heard from Treasury, the Reserve Bank and the Department of Social Services.
[Related: Bridging loan demand booms as house prices skyrocket]
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