Is it time for the WA government to axe stamp duty to get people moving?

A new survey of 15,000 West Australians has found stamp duty is a significant barrier to purchasing a home, particularly for first home buyers and downsizers.

REIWA chief executive Cath Hart said its Housing Issues Survey found more than 60 per cent of survey respondents agreed stamp duty was a serious financial barrier to homeownership.

Too many people are stuck in homes that no longer suit them.Credit: Peter Rae

“Strong population growth and low building completions have seen the WA property market experience sustained price growth over recent years with Perth’s median property price increasing by 23.3 per cent to $740,000 in the year to December 2024,” she said.

“We know that stamp duty is a major contributor to delaying first home buyers from getting onto the property ladder with estimates from ANZ suggesting the time required to save a deposit has climbed to almost 10 years.”

Nearly half of the respondents said they supported raising the first homeowner stamp duty exemption from its current figure of $450,000 to reflect higher property prices. A third were not in favour.

In an election pitch ahead of the March 8 state election, Labor has promised to raise the exemption to $500,000, less than the Liberal pledge to lift the exemption to $550,000.

Hart said stamp duty had a significant impact on housing supply with many potential downsizers living in sought after family-sized homes that were simply too big for their needs.

“Stamp duty is a significant deterrent, because of the prospect of paying many thousands of dollars in upfront transaction costs to downsize, and the alternative is to remain where they are,” she said.

REIWA’s state election wishlist also includes introducing stamp duty concessions for downsizers to encourage mobility within the market, a move supported by 71 per cent of survey respondents.

However, last June Premier Roger Cook ruled out stamp duty breaks for people wanting to downsize their homes to smaller dwellings or apartments.

Ray White chief economist Nerida Conisbee said state governments should look at transitioning from stamp duty to land tax.

She said it represented one of the most significant potential reforms in Australian property policy, but while the economic benefits were clear, most state governments remained hesitant to implement such a major change.

“A land tax system promotes more efficient use of existing housing stock by encouraging property owners to maximise the utility of their assets,” she said.

“For example, keeping a home vacant, without a tenant, becomes more costly. This can lead to reduced vacancy rates as the ongoing cost of holding underutilised property increases.”

Conisbee added a land tax could reduce land speculation and hoarding by developers because of the higher holding costs.

But a move to land tax comes with its own challenges such as setting up an entirely new administrative framework, and Conisbee raised particular concerns for retirees living in homes they bought decades ago in what were now expensive suburbs.

“Despite substantial property assets, many lack the cash flow to manage an annual land tax, potentially forcing them to leave long-established communities. However, this goes back to one of the advantages that it does encourage people to move out of larger homes that may no longer suit them,” She said.

Concerns remain that while a switch to land tax appears, at first glance, to improve housing affordability, the reality in supply-constrained markets like Perth may be quite different.

Rather than saving for both a deposit and stamp duty, home buyers would only need to save for the deposit, significantly reducing their initial costs. On a $1 million property, this could mean needing $50,000 less in savings upfront.

This reduced barrier to entry should, in theory, help more people enter the property market sooner however buyers typically stretched their budgets to the maximum amount they can borrow.

Strategic Property Group managing director Trent Fleskens said ditching stamp duty in favour of a land tax was a much smarter system.

“If the state government are going to create an inflationary environment in the housing construction industry then you will increase the median house price which will price young people out of that market,” he said.

“Five years ago, first-home buyers could essentially buy half of the market without paying stamp duty because the stamp duty threshold reflected the median house price.

“Now, if I wanted to buy a medium house price home as a first home buyer, you’re paying about $30,000 in tax to the Treasurer, and that’s essentially a windfall bracket creep that the State is charging the younger generation in Western Australia.”

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