The Real Estate Institute of Victoria (REIV) has delivered yet another whinge about the high cost of stamp duties in Melbourne, which it claims has eroded housing affordability. From News.com.au:
A typical household now needs to spend 7.5 times its annual income to buy the average Melbourne home outright — up from 6.5 times its income five years ago, according to CoreLogic.
The growing home buying burden is the result of median dwelling prices booming 29.9 per cent over the period, while household incomes have risen just 13.2 per cent.
A new finder.com.au survey also found 21 per cent of Victorians believe home ownership is now out of reach.
The state’s peak real estate body is calling for a reduction in stamp duty and capital gains taxes to make selling and buying less expensive…
Real Estate Institute of Victoria acting president Richard Simpson said the state’s fees were among the nation’s highest, despite recent concessions for first-home buyers.
Mr Simpson said cutting buying and selling fees should result in more properties hitting the market, reducing competition and moderating prices.
“While property taxes contribute about $10 billion to the state’s coffers every year, … increased volume of transactions could deliver the same level of revenue,” he said.
Stamp duty for a median-priced $817,000 Melbourne house costs $44,090, according to the State Revenue Office of Victoria calculator.
I live in Melbourne, and have experienced the stamp duty gouge first hand, so you will get no disagreement from me.
Still, there is no point in the REIV complaining about stamp duties unless it can recommend an alternative revenue source for the states, which need to fund the population ponzi that the REIV loves so much.
Mirvac chief executive, Susan Lloyd-Hurwitz, has the answer today, via The AFR:
“Stamp duty is a terrible tax in terms of the distortions it puts into the market and the incentives it gives people not to transact. A broader-based land tax would be a much better proposition for the market”.
Spot on.
The Australian Treasury has already shown that stamp duties on real estate are one of the least efficient taxes going around whereas land taxes are the most efficient source of tax available, actually creating positive welfare gains to the domestic population since non-resident home owners are also taxed (see below chart).
The Henry Tax review came to similar findings. As has the Productivity Commission. Even the Housing Industry Association’s Dr Harley Dale has previously called for the exchange of stamp duty for land tax.
Scott Morrison’s housing affordability speech last year pinned the blame for Australia’s housing affordability woes on supply not keeping-up with demand. But part of this problem relates to the mis-match between supply and demand created as older empty nesters occupy most of Australia’s family friendly homes, whereas younger growing families are forced to live in ill-suited units and apartments.
Abolishing stamp duties in favour of a broad-based land tax would obviously remove the penalties currently attached to relocating while incentivising households to move to more appropriate houses or employment. In turn, there are likely to be benefits to congestion and commuting times as the housing stock is utilised more efficiently.
In order to facilitate the transition, the government could give home buyers a credit for the stamp duty paid, and then deduct the theoretical land tax that would have applied since the home was purchased.
For example, if someone purchased a home in March 2011 and paid $30,000 in stamp duty, and their annual land tax bill would have been $3,000 per year had the new regime been in effect, then their credit would be $12,000, which can be applied against future year’s bills.
Rather than incessantly whinging about stamp duties, it’s time for the REIV to get on board and advocate for genuine reform.
