The tax that's killing the housing market for everyone
AUSTRALIA'S "worst tax" is stopping nearly half of potential sellers from listing their homes, driving up demand and impacting affordability, a new study suggests.
The survey of 2700 of homeowners, commissioned by LJ Hooker, found 44 per cent of respondents who wanted to sell their home in 2016 but decided against it cited transactional costs such as stamp duty as the reason.
Just over half said they would likely go to market if stamp duty were lessened, while 61 per cent would have gone to market if it were scrapped altogether. LJ Hooker said 60 per cent of survey respondents who requested an appraisal last year decided against selling.
"Homeowners are staying in their properties for longer periods of time which is reducing the necessary turnover of stock," said LJ Hooker network chief Graeme Hyde. "With an increasing and ageing population, it's important all market demographics have the confidence to buy and sell in the marketplace to aid sustainability."
Soaring property prices, particularly in Sydney and Melbourne, have flooded the coffers of state governments with stamp duty receipts. Stamp duty generally accounts for around one quarter of all state government taxation revenue.
"As stamp duty is pegged by the state governments to property prices, we've seen transactional costs rise exponentially," said LJ Hooker head of research Matthew Tiller. "In Sydney, the sale of a median-priced property costs a buyer around $40,000. In Melbourne, the 5.3 per cent duty adds $37,520 for buyers."
CoreLogic figures showed an 8.9 per cent drop in listings and a 9.2 per cent drop in transactions in 2016. Transaction costs, including stamp duty, now account for up to 8 per cent of the value of the home, "reducing the incentive to buy and sell in the same market", Citi wrote in a report this week.
The Property Council, which has long advocated for a complete abolition of Australia's "worst tax", says stamp duty can add more than $60,000 to the cost of a typical Sydney home over the life of a mortgage when interest is taken into account.
Earlier this year, Victoria announced it was scrapping stamp duty for first home buyers on homes valued up to $600,000. In NSW, where a similar exemption exists for new homes up to $550,000, Premier Gladys Berejiklian has conceded it must be explored for existing properties.
Last year, a report by the McKell Institute think tank recommended scrapping stamp duty and moving to a "simpler, fairer" land tax system, which would remove upfront costs on purchasing a home and bring benefits in its own right.
"A stable and simple form of revenue that cannot be avoided, land tax would improve housing affordability through incentivising a better allocation of housing, while also allowing for transport infrastructure to be financed through value capture financing," the report said.