‘Out of control’ stamp duty bracket creep is hurting listings and housing affordability: REIA, SQM Research By Nathan Mawby
Property experts say stamp duty’s bracket creep is ‘completely out of control’. See how bad it has become in your city.
Australian stamp duty costs are “completely out of control” as ‘bracket creep’ is slashing the number of homes for sale and fuelling affordability issues, property experts claim.
A new report by the Real Estate Institute of Australia and SQM Research has found the percentage of Australian homes available to purchase has fallen from 4.5 per cent in 2008 to just 2.5 per cent today, with figures considerably lower in the major capitals.
Report author Louis Christopher acknowledged the figures would also have been impacted by a surge in panic listings in 2008 as the global financial crisis hit, while the current low listing numbers were in part due to protracted lockdowns in Melbourne and Sydney.
“We aren’t saying this (stamp duty) is the whole reason, but this does seem to be a leading contributor,” Mr Christopher said.
“There has definitely been a stamp duty bracket creep. We think that has increased the overall transfer cost, and we believe that would be a fairly significant disincentive to move house.”
The research shows across the country that stamp duty now equates to 4.2 per cent of a homes price, up from 3.2 per cent in 2011.
In Victoria, home to the nation’s highest stamp duty costs, the typical tax on a house in Melbourne was $20,650 (4.3 per cent of the home’s value) in 2012, but is now $44,540 (5.4 per cent of the home’s value).
With average incomes rising slower than median house prices, stamp duty as a percentage of average earnings has risen from 25.1 per cent to 34.3 per cent.
REIA president Adrian Kelly said there were a range of factors driving prices up and listing numbers down, including those nervous about being caught out by Covid-19 lockdowns.
But it is inescapable to buy a house in Sydney or Melbourne would now cost almost half an average worker’s yearly income in tax.
He called for politicians to stop treating stamp duty and housing affordability as an election term issue and to outline a 20-year plan that would transcend changes in government.
“Tax on housing is one part of it, but freeing up land and planning is another,” Mr Kelly said.
“The bracket creep for stamp duty is getting completely out of control.”
The report also shows that the number of properties in Australia has risen from 8.6 million in 2008 to 9.6 million in latest estimates, making the falling number of homes for sale even more remarkable.
Mr Christopher said he expected there would be a short-term rise in home listings as Melbourne and Sydney exited lockdowns, but that in the medium term homebuyers might find they have even less choice.
“We are at risk that over the medium term, listings could go even lower from here,” Mr Christopher said.
“Unless we see a whole range of changes that are needed to address affordability.”
Less than 1 per cent of houses in the city are for sale, down from 2.5 per cent at the end of 2008, with the most recent peak at 1.9 per cent in November 2018, according to the report.
This represents a drop from 30,000 homes on the market to less than 15,000.
If units are added, the city has gone from about 2.5 per cent of homes on the market in 2008 to 1.2 per cent.
The typical stamp duty cost for a house has risen from $22,545 (3.7 per cent of the home’s value) to $42,457 (4 per cent of the home’s value), and from $17,707 (3.5 per cent of the home’s value) to $28,957 (3.9 per cent of the home’s value) for units.
A Sydneysiders average earnings were $70,470 but are now $91,744.
Melbourne’s market liquidity peaked in 2012, with 3.2 per cent of the market (or about 38,000 houses) listed for sale, but is currently at 1.5 per cent (about 20,000 houses).
With all properties included the market has gone from 3.4 per cent in 2012 to 2.1 per cent in August 2021.
The typical stamp duty for a house in Melbourne was $20,650 (4.3 per cent of the home’s value) and is now $44,540 (5.4 per cent of the home’s value) — making it the nation’s worst affected by stamp duty.
For units, the figures were $17,870 (4.2 per cent of the home’s value) and are now at $31,370 (5.2 per cent of the home’s value).
Waves for the typical Melburnian have gone from $67,662 up to $91,109.
About 5 per cent of Brisbane homes were on the market in 2008, but that number has fallen to 2.5 per cent today.
Houses for sale peaked at just over 3.5 per cent in 2011, while their numbers are now sitting just below 2 per cent.
Unit liquidity in the city reached more than 8 per cent in 2018, and is still above 6 per cent.
Has the nation’s most affordable stamp duty margins, with the typical house costing just $6300 in tax (1.5 per cent of the home’s value) in 2012, while today buyers pay $12,850 (2.1 per cent of the home’s value). For units the figures work out to $4410 (1.2 per cent of the home’s value) and $5828 (1.4 per cent of the home’s value).
The average worker was earning $68,936 in 2012 and is now pulling in $85,831.
Mr Christopher noted that as the most affordable state in the country, and with a range of other benefits to it, Queensland could attract more buyers chasing a cheaper lifestyle as other states stamp duty and house prices continue to rise more rapidly.
The South Australian capital’s liquidity peaked at around 3.2 per cent in 2013, but is now at about 1.7 per cent. With houses tracking just below that level throughout the past eight years.
However, one in 20 of the city’s units are for sale today, down slightly from having 1.3 in every 20 for sale in 2019.
A $15,430 typical house’s stamp duty bill in 2012 accounted for 4 per cent of the home’s value, but has risen to $22,705 or 4.3 per cent of the home’s value today.
Units rose from $12,180 (3.8 per cent of the home’s value) to $17,330 (4.1 per cent of the home’s value).
The typical year’s salary shifted from $64,132 up to $81,692 in the same period.
Tasmania’s capital had 4.8 per cent of its homes available for sale in November 2012, and 1.1 per cent in August this year.
The high water mark for houses was about 4.2 per cent in early 2013, and 8 per cent of its units available for sale in early 2012.
While the median house attracted $11,270 in stamp duty in 2012 (3.3 per cent of the home’s value), it is now at $22,498 (3.7 per cent of the home’s value). For units the numbers have risen from $8302 (3.1 per cent of the home’s value) to $22,498 (3.7 per cent of the home’s value).
Average annual earnings rose from $62,239 to $79,076 in the time.
But the island state does have one ongoing issue, with development constrained by the difficulty of accessing supplies locally and new builds more expensive as a result, according to Mr Christopher.
Alternatives to stamp duty include a broad based land tax, which is being sought by the REIA — though it is meeting opposition from those who fear it will see retirees and pensioners forced from their homes as they cannot afford the annual tax on their land.
In NSW buyers are now being given the choice between paying stamp duty upfront and paying land tax annually.
Victoria’s government seemingly backed stamp duty for the near future in its latest budget, increasing the impost for homes worth more than $2m.
The federal government also looked at including housing under the GST when the tax was implemented, but Mr Kelly said that idea was unlikely to win support today.
“But something has got to give,” he said.
“All of the premiers have got to get their heads together and come up with something better than we have got now — particularly for the first-home buyers.”
The report cites past research by Deloitte Access Economics that found scrapping the tax would lead to a 30 per cent increase in sales initially, and a 60 per cent surge over three years.
The federal government’s Productivity Commission has also recommended a broad based land tax based on unimproved land value paid annually, rather than the upfront tax burden.
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