Experts say stamp duty continues to be a major factor that dampens housing affordability, particularly for first-time buyers

A new study found that the highly-contested stamp duty is a major contributor to the shrinking housing supply.

According to a study by the Real Estate Institute of Australia (REIA) and SQM Research, residential property listings have declined across the country as house prices, boosted by the tax on sales, continue to skyrocket.

National property listings have been falling since last year and are currently sitting at just over 200,000 - the lowest on SQM's records.

The current number of listings was substantially lower than the average between 2011 to 2019, which ranged from 300,000 to 380,000 listings.

Furthermore, the report said that only 2.5% of all residential properties were available for sale, down from 4.5% in 2008.

SQM Research managing director Louis Christopher said the decline in listings has been occurring despite the steady increases in total dwellings across Australia and through various housing cycles.

"While there maybe various reasons for this situation, we believe stamp duty bracket creep is a leading contributor,” he said.

“When transaction costs of transferring properties disproportionately rise compared to dwelling prices and incomes, then that must be a massive disincentive for property owners to move house.”

Worsening housing affordability

REIA president Adrian Kelly shared the same sentiments on stamp duty, adding that it remains as one of the biggest factors that discourages activity in the housing market.

"Stamp duty remains a prohibitive tax for all buyers, adding tens of thousands of dollars to the purchase of a home – for empty nesters, paying tens of thousands of dollars on a home they may only need for five years means less properties will be placed on the market," Mr Kelly said.

Mr Kelly believes state and territory governments have bolstered their coffers at the expense of housing affordability.

"Stamp duties as a percentage of average national earnings have jumped over the past decade to 34.3% from 25.1% recorded back in 2012, up almost one third," he said.

"In Sydney and Melbourne, stamp duties alone can represent nearly half the average annual income."

In addition, the transfer duties as a share of median property prices have increased in most capital cities between 2011 and 2021 given the uptrend in prices.

Mr Kelly said first-home buyers were the biggest losers, as they were forced to borrow more to accommodate higher stamp duties and house prices.

"In real terms, at current median income and rising housing prices, had stamp duty remained at the 2012 amount, home buyers would save an average nation-wide of $21,000 with Victorians saving a whopping $35,000, or half an annual median salary in Australia," he said.

But it seems the market is already feeling the negative impacts of skyrocketing house prices.

The latest CoreLogic data showed that Australia’s monthly house price growth stalled at 1.5% in September, showing signs of slowing down.

Furthermore, latest figures from the Australian Bureau of Statistics show that total lending for housing fell by 4.3% in August, the biggest decline since May 2020.

The decline was driven by retreating owner-occupiers — the segment reported a 6.6% decrease in financing commitments during the month.

If it was not for the 1.5% uptick in investor loans, the overall home financing commitments would have fallen further in the month.

In his latest commentary, AMP Capital chief economist Shane Oliver included abolishing stamp duty as one of the key policies state and territory governments should consider to ease affordability woes.

"Policies that are less likely to be successful include grants and concessions for first home buyers, as they just add to higher prices,” Mr Oliver said.

“Abolishing negative gearing would just inject another distortion in the tax system and could adversely affect supply.”

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