Stamp Duty Sucking the Life out of Markets: domain.com.au's real estate blog

Stamp Duty Sucking the Life out of Markets: domain.com.au's real estate blog

THIS IS A VERY GOOD THREAD ON THE ISSUE

Like Dracula, our state governments know they are sucking the life out of the property industry through the continuation of unfair stamp duty on residential property but they just can't help themselves.

Let's get one thing straight. I am not an advocate of abolishing stamp duty for affordability reasons. I just think it is this country's worst tax and it stymies investment.

While a tax review is on the table, state governments should immediately commit to working towards the abolition of stamp duty. Don’t forget, we were led to believe they would do this when they negotiated the GST intergovernmental agreement. They won’t agree voluntarily. You see, the states are hooked on over $5 billion of stamp duty revenue.

The level of stamp duty on homes is out of control. In major states the median priced home will attract stamp duty of over $20K. This compared to less than $5K per property 15 years ago.

Now before you point out that wages have also increased and that the comparison is unfair you should consider this. While stamp duty has increased by a factor of four fold since 1993, wages over the same time are only up 75%. Growth on stamp duty takings have been lapping wages for some time.

State governments have received massive, effortless windfalls from hapless home buyers. If this tax was in any way equitable it would have - over that time - been indexed to wages or inflation, not house prices. That is why compared to the average wage, stamp duty is now obscene. After all, in 1993, the ordinary home buyer would only have needed 18% of their annual wage to foot the average stamp duty bill - today that figure is a tick under 50%. How can any state government reasonably justify charging the average home buyer 50% of their annual income for a home purchase? Simply, they can’t.

The real victims here are ordinary families who need to move homes to accommodate growing families. It’s not like they can use the growth in the value of their homes to subsidise the stamp duty. They need that money to pay for the next house that is most likely no less expensive. In fact, we make these families borrow more money from the bank just to pay this most ridiculous of state taxes.