Who else hates stamp duty?
Stamp duty is a blight on the plans of so many people who want to buy a house in Australia - especially first home buyers and anyone looking at the prestige market. The New South Wales Office of State Revenue notes that if you're buying a property worth more than a million dollars, you're paying $40,490 as a base tax, plus $5.50 for every $100 over the million dollar mark that your home costs.
On top of this, you pay the same base stamp duty on a property just over $300,000 as you would on a $900,000 property. It's ridiculous, especially when you consider that the RP Data median value in Sydney was $843,340 at the end of February. First home buyers are facing enough impediments as it is, and stamp duty is only adding to the pain.
I'm not the only one who thinks so either. Let's look at who else wants stamp duty to be changed.
The Real Estate Institute of New South Wales
In a March 11 press release from this organisation, President Malcolm Gunning discussed how stamp duty was unfair on many house hunters, and mainly benefited the government.
"The time for a commitment to reviewing these taxes is now. An overhaul of bracket creep must be put to the top of the agenda and first homebuyers must be supported by tapping into these outrageous profits the Government is collecting," he said.
And he's not wrong. This press release noted that stamp duty profits rose by 40 per cent in 2013-2014, and are going to rise again this year. The amount people have to pay on top of property prices is staggering, and we need serious revision to let people get into the market more easily.
Clover Moore, Mayor of Sydney
On March 29th, the Australian Financial Review posted an article discussing more pushes for stamp duty reform. In this, Lord Mayor Moore noted that changing planning laws isn't just good for buyers, it's a real and necessary change that helps everyone.
"Any planning reform in NSW must tackle housing affordability. This is an economic issue, not just a social one," she told the publication.
"The solution is not as simple as 'build more houses'. We need real leadership in the form of binding affordable and social housing targets in major new developments."
And I have to agree. There's no time like the present to start targeting planning restrictions and stamp duty. It will make buying prestige property, as well as first homes, all the easier.
What can be done?
One thing the State Government has not done during the latest property boom is adjust stamp duty to account for rapidly rising prices. All buyers are facing the plight of "bracket creep" - paying more stamp duty as prices rise over time. While this fills the coffers of government with more general revenue, it hurts the pockets of struggling home buyers and investors keen to get into the market.
The problem is that governments of both sides of politics are addicted the easy revenue that stamp duty provides. They don't have an easy answer to provide a replacement source of revenue.
Stamp duty is also a major deterrent for home buyers wanting to upgrade. It's a spanner in the works for buyers wanting to trade property more regularly as life changes occur. It's also poor for the environment - many buyers would love to move closer to work and avoid traffic congestion and pollution, but again stamp duty is another impediment to moving house.