DEBATE has sprouted in the real estate industry about whether a New South Wales move to phase out stamp duty would help people enter the housing market.
First National Real Estate Collie & Tierney director Ben Ridley said the proposal to replace stamp duty with a land tax would not be as simple or as beneficial as people might think.
“It’s a double-edged sword,” Mr Ridley said. “It will help in the short term but the land tax proposal is always an interesting one.
“It can sometimes be seen as another tax that if you stay there long term might end up costing more than what the stamp duty initially costs.
“As a short-term solution to help people get into the market it’s a good idea, but long term you may end up paying more.”
Mr Ridley said without fixing the issues of housing supply, giving more people access to the market might have unintended consequences.
“It’s not going to make it easier to get into the market here. It always increases that extra bit of competition that you may have, which forces pressure on prices to go up as well.
“It may have an effect whereby it seems like it’s helping more people get into the market, but by doing that it actually makes it harder to get into the market because there is more competition and that drives up prices.”
Mr Ridley said stamp duty was Victoria’s biggest revenue stream and doubted the state would implement a policy where it suffered a great financial loss.
“I’m sure that they are looking other ways how they get revenue.
“(Land tax is) essentially like adding another council rate each year. If you get a house and then you live there for 20 years, then you’ll pay more than what the stamp duty is. If you’re there for just a few years, well, they’ll figure out what to do.”
NSW Premier Dominic Perrottet has long detested stamp duty, referring to it as an “inherently terrible tax” and a “massive impediment for people getting into the housing market”.
This month he repeated his opinion it should be phased it out in favour of a land tax.
Details of the proposal have not been released to the public, but it is expected to form part of the next State Budget. However, The Sydney Morning Herald said it was likely homeowners would initially be given the choice between continuing with stamp duty or a land tax but any choice of the latter would be permanent for that house. Therefore future owners would be required to pay land tax.
The top 20 per cent of NSW properties would be exempt from the changes and would continue to have an attached stamp duty in order to limit the state’s loss of revenue.
Mr Ridley suggested a simpler solution.
“Lower the stamp duty,” he said. “At the end of the day, stamp duty is just a government tax. I would think if it was a much more affordable and lower stamp duty, then the governments would absolutely be seen to be doing a good thing.
“They know that they will make monstrous profits year in, year out so the only way they can really help out is reducing that tax that people have to pay.
“Stamp duty is quite an exorbitant amount given that the median price in every state and territory has gone up by sometimes 50 per cent in the last three years alone.”
Mr Ridley said other states would watch closely how this reform panned out but remained unconvinced about its benefits.
“I understand the concept, I’m not sure that I like the end result,” he said.
