‘Half the mortgage life paying off taxes’: Red tape, taxes, eating up the cost of new homes

Huge chunks of the cost of building a new home are being eaten up by taxes and red tape, new analysis shows.

Half the cost of building a home in Sydney is taxes and red tape, new analysis shows.

Research by the Australian Centre for International Economics shows 49 per cent of the money for a house and land package in a Sydney suburban development goes toward regulatory costs, infrastructure charges and tax.

The analysis – commissioned by the Housing Industry Association – concludes it has been more expensive to build a family home.

Behind Sydney, the other capital cities face less burdensome regulation.

For a greenfield home in Melbourne, 43 per cent of the cost goes on tax and red tape; Brisbane is 41 per cent, Adelaide and Hobart 37 per cent, and Perth 36 per cent.

The average cost of a greenfield apartment in Sydney is $918,000 – 38 per cent of which is tax and red tape. Picture: NewsWire / Ian Currie

“New home buyers are spending the first 15 years of a 30-year mortgage just paying off that tax,” HIA chief economist Tim Reardon told The Australian.

The tax and red tape expenses for a new apartment in Sydney will eat up 38 per cent of the total cost; the other state capitals cost between 30 and 34 per cent.

While timber, bricks and mortar account for between half and two-thirds of the cost of building a home, the analysis shows the cost of building in new suburban developments has skyrocketed.

The analysis finds the taxes and charges on a house in a new Brisbane suburb has increased 106 per cent in six years – jumping to $348,000.

Sydney has seen a 38 per cent spike, but the hike has been 73 per cent in Melbourne and 90 per cent in Adelaide.

“Australia has an acute shortage of housing because governments continue to tax new home building and impede productivity in the sector,” Mr Reardon said.

“Government taxes, fees and charges on new homes have doubled in five years.

“Not even the best, legitimate investment strategies could achieve that same level of return.”

Originally published as ‘Half the mortgage life paying off taxes’: Red tape, taxes, eating up the cost of new homes