4 February 2019

Stamp duty stymies the real estate market

REINSW recently launched its Election 2019 campaign to lobby the NSW Government to make better decisions for the property services industry and NSW homebuyers.

The two key components of the campaign are:

  1. Establishing a Commissioner for Property Services and moving the property services industry out from NSW Fair Trading
  2. Property taxation reform, starting with stamp duty

These are critical changes that must occur to ensure the health and continued prosperity of the property services industry, the State's largest industry.

As the campaign moves into its second phase, REINSW is calling on its members, the wider industry and the general public to sign the petition to encourage the NSW Government to prioritise stamp duty reform.

“Property impacts everyone,” says REINSW CEO, Tim McKibbin. “Everyone needs a roof over their head. It’s a basic necessity of life. For a Government to significantly impede its citizens' efforts to achieve this is simply appalling.

“However, unfortunately, the NSW Government is addicted to stamp duty revenue. So, without active and continued pressure from industry and NSW homebuyers, nothing will change.”

A habit hard to kick

In the 2017–18 financial year, the NSW Government pocketed $8.4 billion from stamp duty revenue.

In a recent interview with 7.30 NSW Treasurer, Dominic Perrottet, said the NSW Government has taken steps to address stamp duty by indexing the rates of tax and removing the impost of stamp for first homebuyers on properties up to $850,000.

“These initiatives are ludicrous,” says McKibbin. “The NSW Government provides stamp duty relief on properties with a sale price of $650,000 or less, and a sliding scale of stamp duty relief that diminishes proportionally between $650,000 and $850,000.

"Firstly, the median house price in Sydney is $985,000 and the median unit price is $717,000. At these prices, already very few Sydney homebuyers are benefitting from the Government's initiatives. Unless the NSW Government is suggesting first homebuyers move further away from the State’s CBD and employment opportunities or join the ever-increasing ranks of people moving interstate where homeownership is still a reality?"

McKibbin says the NSW Government’s move to index stamp duty rates– an initiative announced in November 2018 and effective from 1 July 2019 – is all political hype and of no tangible benefit.

“The NSW Treasurer has acknowledged that the stamp duty rates have not been amended since they were introduced in 1986, but still stands by the move to apply indexation to tax brackets that are over 30 years out of date.

“It's ridiculous that the NSW Government believes these smoke-and-mirror actions will fool NSW homebuyers. If they are not aware now, they will be when they pay their stamp duty.”

Impacting market cycles

McKibbin says poor decision-making by NSW Fair Trading and inaction from the NSW Government is impacting the turnover of NSW property.

“Recent research identifies stamp duty as a key reason retirees don’t downsize,” he says.

“There are thousands of couples living in large, four and five-bedroom houses on big blocks who are disincentivised to move because of the money they’ll lose in stamp duty. These houses need to be recycled into the market for growing families and first homebuyers. 

“The lack of movement stymies housing development as apartments and villas, perfect for downsizing retirees, struggle to sell.”

McKibbin says stamp duty is also a key reason why families with parents in their late 30s and 40s are still renting.

“Renting is a great option for many NSW families, if that is their choice. However, if the reason they’re renting is because they cannot afford to buy a home due to Government-imposed taxes and charges, something must be done,” he says.

“It is a sad indictment on the NSW Government if hard-working NSW families can’t afford to put a roof over their heads.

“Interestingly, the NSW Government’s own published data proves a continuing decline in property transactions and consequential stamp duty revenue. The irony? There is empirical evidence demonstrating that a reduction in the rate of tax will increase transactions and result in more revenue for the Government. It’s a win-win, home ownership becomes more affordable and the NSW Government makes more money.”

REINSW taking a stand

McKibbin says the NSW Government has unfairly and unconscionably profited from stamp duty for too long. He believes that unless stamp duty reform is front and centre of the next NSW Government, the housing market will be adversely affected, as it was with the vendor duty.
“The NSW Government should ask itself if it wants to lead housing affordability and growth or continue to actively hinder its constituents’ ability to achieve the Australian dream of owning a home.”

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