Stamp duty: Slashing stamp duty would cut Sydney house prices by $35K
LEADING economists have slammed stamp duty as a nonsensical and “desperate” cash grab, calling on the Berejiklian government to finally show some political courage and scrap or reduce the antiquated tax.
NSW
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- Stamp duty: Stamping out Sydney’s housing crisis
- Federal bureaucrats cash in as taxpayers fund their stamp duty
LEADING economists have slammed stamp duty as a nonsensical and “desperate” cash grab, calling on the Berejiklian government to finally show some political courage and scrap or reduce the antiquated tax.
Soaring stamp duty charges are forcing people to overbuild cavernous homes that they’re later too scared to move out of, sending house prices through the roof and crippling supply.
KPMG’s chief economist, Brendan Rynne, says a replacement of stamp duty with a broader land tax would encourage home buyers to find property better suited to their needs and allow them to move several times, putting downward pressure on prices.
“There needs to be political courage,” he said.
His colleagues have taken aim at stamp duty as an outdated tax that no longer has a place in the system.
It comes as analysis by the NSW Business Chamber reveals the state is far more reliant on stamp duty than any other state.
NSW Business Chamber chief executive Stephen Cartwright warned the state was “around twice as reliant (on stamp duty) as South Australia, Tasmania, the ACT and Queensland, and around three times as reliant as Western Australia and the Northern Territory”.
“The latest census shows that in NSW there was an average of 2.6 people living in each household yet there are three bedrooms in the average dwelling,” he said.
“If every bedroom in NSW were occupied, this would have the same effect on the housing stock as building a city bigger than Newcastle and Wollongong combined.”
Property Council NSW executive director Jane Fitzgerald has also pointed to the fact median house prices in Sydney would be slashed by $35,000 if the charge was done away with or by $17,000 with even just a 50 per cent reduction. The REINSW also estimates that for every $1 million taken in revenue, the economy also takes an $800,000 hit.
“If the NSW stopped its reliance on this archaic tax and instead looked at other ways to raise revenue, then house prices would come down and affordability would improve,” she said.
The REINSW wants stamp duty for first home buyers to be cut by 50 per cent if the residential property is worth less than $1 million.
The Henry Tax review had previously advocated for there to be “no role for any stamp duties” in a modern tax system, arguing instead for taxes that are levied on land bases.
Mr Rynne said stamp duty remained “one of the most inefficient taxes” because it made buyers reluctant to change properties.
The KPMG chief economist said it encouraged buyers to “to make the house as big as possible”, creating a disincentive to move, meaning it should be swapped with a broadbased land tax to bring down prices.
“Once you start building smaller houses on those blocks of land and you’re not overbuilding them, you also automatically bring down the house prices as well,” he said.
“Because you’re not paying for an overbuilt house. So that’s likely to increase supply and you’re going to have further downward pressure on prices as well.”
Former federal Treasury economist Gene Tunny agreed that stamp duty was problematic, saying it acted as an impediment to labour mobility.
“There is almost a consensus in the economics profession that stamp duty is an inefficient tax and you should move to a land tax,” he said.
“Stamp duty doesn’t make sense in the taxation system.”
BT Financial Group chief economist Chris Caton also said the tax “doesn’t make a lot of sense”.
“I would agree that most economists think that,” he said. “All taxes impose costs and this one doesn’t have a lot going for it.”
Prominent economist Clifford Bennett said stamp duty was “the standout ‘why do we still have that’ tax” and has suggested tinkering with the overall system, including considering a higher GST.
“There has to be some bold leadership at some point,” he said.
“Already in the building of property there is a high level of taxation through GST and other taxes. To again apply a further tax is really unjust. It’s a desperate grab at cash by the state government.”
Mr Bennett said Prime Minister Malcolm Turnbull needed to sit down with state premiers and find a way to get rid of the tax.
“It’s the final impediment from people being able to break out of the renters’ class and into the home ownership class,” he said.
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Former RBA economist Callam Pickering said stamp duty was a “very volatile form of income for state governments and makes it very difficult to do advanced planning”.
“It’s sort of a tax but doesn’t really have many benefits,” he said.
“The states use it because it raises a lot of money but there are a lot of other ways you could raise money without the downsides of stamp duty.”
Newcastle small business owner Owen Burns and his family have been looking to buy a home but have found that added costs such as stamp duty have made them feel as though “home ownership is a privilege, not a right”.
“Stamp duty doesn’t help that at all,” he said.
DUTY BOUND:
î Completely removing stamp duty would slash Sydney median house prices by $35,000
î Every $1 million generated in stamp duty revenue costs the economy $800k
î REINSW wants stamp duty cut by half for first-home buyers on properties under $1 million.
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