Stamp duty bills have increased nearly three times faster than house prices since the 1980s, and this trend will continue unless stamp duty is reformed, according to the latest edition of the Housing Industry Association’s (HIA) Stamp Duty Watch report.
“The results also highlight just how much high property prices are helping to stoke state coffers – $20.6 billion in 2016,” said Martin North, principal of Digital Finance Analytics (DFA). “A switch to a broader property or land tax might be an option, but is politically risky. This would need to be part of broader property sector reform.”
Overall, the dependance of the states on stamp duty has worsened. In 2015-16, stamp duty accounted for 26.1% of tax revenues, the highest share since 2008-09. Stamp duty dependence is highest in Victoria (30%), followed by New South Wales (28.1%).
In December, the typical stamp duty bill shouldered by owner-occupiers across Australia was $20,587. “This has a detrimental effect on affordability as it adds another 3.1 per cent to the dwelling price,” HIA said.
Stamp duty also eats into homebuyer deposits, forcing buyers to settle for smaller homes or take on bigger mortgages. “In this way, stamp duty increases mortgage repayments by $1,247 per year – equivalent to over $37,000 over a 30-year loan term. The escalation in the LVR means that expensive LMI policies may also have to be purchased,” HIA said.
According to Shane Garrett, senior economist at HIA, state governments are compounding the housing affordability crisis through their policies.
“Total stamp duty revenues have almost doubled over the past four years: from $11.7 billion in 2011/12 to $20.6 billion in 2015/16 – most of which is likely to have come from residential building,” he said. “State governments are now more reliant on stamp duty revenues than at any time for a decade. This trend will continue unless state governments recalibrate their taxes on housing.”