- The developer lobby is the boy who cried wolf in Australian real estate. He’s actually right about something
and desperately wants to be heard, but no one is listening any more.
The recurring topic is the cost of housing. It’s absorbing far too much time and energy for stakeholders
everywhere, because politicians find the obvious solutions unpalatable.
If politicians stopped taxing real estate to within an inch of its life, life for home-buyers would become so
much easier. The cost of a new home for a first-timer could be massively reduced. One estimate suggests
the typical new home in Sydney could cost $250,000 less.
The developer lobby argues that stamp duty is the single biggest problem. I have to agree that stamp duty
is an obscenity. Having to cobble together a deposit is a big enough challenge for property buyers, without
having to save to pay an exorbitant and unjust tax as well.
Stamp duty on the median priced dwelling in Sydney ($752,000 according to RP Data) is almost $30,000.
It’s similar sum for the same purchase in Perth, while anyone buying a home at that price in Melbourne
would pay over $40,000.
It’s tantamount to paying a fine for the crime of buying a home or an investment to fund your retirement.
The developer lobby has been targeting this issue with one of its endless campaigns. It wants stamp duty
scrapped. It presents some compelling evidence, but I doubt anyone important will take any notice because
builders and developers have been crying wolf on multiple issues (e.g. the mythical housing shortage crisis)
And its proposal overall is a massive turnoff. Its argument essentially is this: everyone should pay more tax
so that the development industry can make more money.
The Property Council of Australia, arguably the most self-absorbed group in society, is suggesting that
stamp duty should end and the lost government revenue be recouped by increasing the GST.
The proposal, therefore, is that everyone should pay more for everything they buy so that real estate can
be exchanged cheaper. I’m sure that’ll go over well with the general public and the politicians they elect.
The council argues stamp duty is inefficient and "a runaway cash grab that's hurting Australia's economy
and locking out potential home buyers". It says the community should be outraged at figures like these:-
· The cost of stamp duty to a home buyer with an average-sized mortgage has increased 795% in
Melbourne and 749% in Sydney in the past 20 years.
· Property owners have become Australia's largest collective taxpayer, contributing 9% of total tax revenue.
· Property taxes make up as much as 46% of state, territory and local government budgets. Stamp duty
alone contributes more than 20% of the total revenues of the NSW, Victoria, Western Australia and
Northern Territory governments.
· The cost of stamp duty over the life of an average mortgage is now $61,542 in Sydney, $56,616 in
Melbourne, $49,701 in Darwin and $35,427 in Canberra.
The Housing Industry Association, another noisy member of the developer lobby, says property taxes add
around $250,000 to the price of a new home in Sydney. That, it says, accounts for 40% or $1,350 per
month for the life of a home mortgage.
"Taxes on new housing are a brake on economic activity, and represent a constraint on housing
affordability and labour productivity," the association's head of industry policy Graham Wolfe says.
Wolfe says stamp duty is the most inefficient tax in the system. However, he says there are many other
taxes on new homes, including developer infrastructure levies, which can add $70,000 to the cost of a new
home-and-land package. GST is also levied on new homes, but not existing properties, adding tens of
thousands of dollars to the cost.
The problem is: state governments will never give up their property taxes. They’re addicted to them.
We’ve seen what’s happened with the ACT Government. It went to an election promising to eliminate
stamp duty within a specific time frame. Now they’re reneging on their promise. They just can’t let go of all
that lovely money.
And, for them, the protests of the developer lobby are just background static. No one is listening.