Housing affordability: New plan a 'groundbreaker'
FINALLY, someone is doing something about the housing affordability crisis. Let's just hope the rest of the states are brave enough follow suit.
West Australian Premier Colin Barnett has promised a $15,000 stamp duty discount for seniors who want to downsize - the nation's most substantial concession of its type.
He has promised that if his Liberal party, is re-elected it will provide the stamp duty discount for the purchase of new and established homes valued up to $750,000, as well as a concession of up to $10,000 for vacant lots up to $400,000.
This is a significant announcement for housing affordability because the high cost of stamp duty is widely regarded as a major force driving skyrocketing house prices.
By discounting the tax for seniors, they will be more incentivised to downsize, thus getting the supply chain moving.
"Transfer duty creates a significant barrier for seniors over 65 on fixed incomes who are looking to change their lifestyle or down size. The cost of transfer duty on a median house price of $520,000 is $18,715, which is almost equivalent to the entire annual standard aged pension of $20,745.40," Real Estate Institute of Western Australia (REIWA) President Hayden Groves said.
"The $15,000 concession the Government have committed to, which is capped at $750,000, will make a substantial difference to those seniors looking to 'right size' into more suitable accommodation, and will help address the issues of housing affordability, choice and livability."
The Housing Industry Association (HIA) has also lauded the promise as groundbreaking for affordability.
"This policy is a masterstroke in the housing affordability debate," John Gelavis, Executive Director of the HIA said.
"Western Australia's population is ageing and increasingly we see Baby Boomers whose equity is locked up in their quarter acre block in the inner suburbs. The homes are ageing and the property is too much for them to maintain - but they don't move as the cost of buying a smaller home nearby is significantly increased by stamp duty."
But while the move is welcomed in WA, eyes are now on the New South Wales government - and its new Premier, Gladys Berejiklian - as the state tackles the most impossible housing affordability crisis in the nation.
In Sydney, the median house price has reached almost seven figures. According to CoreLogic's latest house price index, the median house price is $970,000.
When Premier Berejiklian was sworn in as the NSW Premier following Mike Baird's shock resignation in January, the state's crippling housing affordability problem and what she was going to do about it was thrown into the limelight.
And in her first public appearance since taking the top job, the new Premier vowed to make housing affordability a top priority.
"I want to make sure that every average, hardworking person in this state can aspire to own their own home," she said.
When quizzed on how she would do this, she claimed increasing supply was "the best way to address housing affordability".
When asked about her view on replacing stamp duty with a land tax, she said she had previously indicated it was not her preference but alluded she was open to it by saying she was "someone who will listen and someone who has an open mind".
The NSW government collected $534 million from residential property transfers last month alone - about $73 million more than the previous January. In December, the state collected more than $735 million in stamp duty, according to figures from the Office of State Revenue.
But the Real Estate Institute of New South Wales (REINSW) is urging the Premier to understand how stamp duty concessions for seniors increases supply.
"Premier Berejiklian has stated that the key to housing affordability is supply. However, supply is not just about new homes. The key to housing supply is unlocking existing properties held by retirees," REINSW President John Cunningham said.
"Buyers are now forking out over 4 per cent of the value of a property on stamp duty and this is stopping the supply of established homes flowing into the market. This problem has been caused by successive governments who failed to address stamp duty bracket creep for over 30 years.
"By providing stamp duty incentives to older Australians to downsize we will see many more properties coming onto the market. There would be a chain reaction. One transaction can set off a chain reaction that leads to 10 sales.
"If we get the supply of existing properties flowing then the price pressure will be eased."
REINSW is calling on the NSW government to provide retirees with a 50 per cent reduction in stamp duty for a residential property purchased to replace an existing residential property up to the value of $1 million.
But in addition to aiding supply by unlocking larger homes left largely unused by Baby Boomers and creating a chain reaction, Mr Gelavis noted that incentivising seniors to downsize will also free up space for new development.
"Reducing [stamp duty] will have a threefold benefit - the large infill property will become available for development, helping to meet density targets; infill lots will become more readily available, reducing the squeeze on prices that comes with lack of supply; and most critically, seniors will be able to find and move into a home that is suitable for them to age in," he said.
Your move, Premier Berejiklian.