Stamp duty stops thousands from moving every year: PropTrack, e61 Institute report

Stamp duty costs force homeowners to rethink moving, with research revealing just one percentage point increase has the potential to stop tens of thousands of transactions.

Auctioneer Ricky Briggs during a Sydney auction at last weekend. Picture: Tim Hunter.

The removal of stamp duties could instigate 100,000 more home sales each year in NSW alone, with new research revealing a single percentage point increase to the transaction tax significantly reduces a buyer’s appetite to purchase.

The findings from research firms e61 Institute and PropTrack revealed a 1 per cent increase in stamp duty can reduce property sales by 7.2 per cent each year as the burden of the “inefficient tax” creates an affordability hurdle.

The research analysed the impact of then-Queensland premier Anna Bligh’s 2011 decision to nearly double stamp duty for owner-occupiers. Despite a short-term boost in the six weeks between the announcement of the change and implementation, the 2011/ 2012 financial year recorded a 9 per cent drop in the number of people moving – the equivalent of 20,000 households – and a 14 per cent decrease in people moving to the Sunshine State.

The decision was reversed when the Newman Government won power in 2012.

The research found more people would move if stamp duty was removed. Picture: Tim Hunter.

Research Manager at e61 Institute, Nick Garvin, said the economic impacts of stamp duty on employment, productivity and housing availability aren't immediately obvious.

“Everybody knows that stamp duty is a big cost, but it’s fairly hidden because it gets charged to people at a point when they’re spending all their savings ,” Dr Garvin said.

“It’s important to understand that there are economic effects. There are pretty strong signs that the productivity of the economy would be lifted when it’s easier for people to move and change jobs. With slowing productivity and problems with housing availability, removing barriers to job and housing mobility is critical.”

Dr Garvin suggests that if NSW removed stamp duty, about 100,000 additional owner-occupiers would move home each year, up about 25 per cent on current levels.

“Queensland gives us a quantification of the sensitivity of purchases to stamp duty,” he said, with the economic modelling taking into account interest rates and other influencing factors on the market at the time.

“This is the best estimate we have – obviously different states, different points in time, the effects could vary – but we have no particular reason to think the effect in Sydney would be higher or lower.”

Since the mid-1990s, the average stamp duties collected nationally have tripled relative to incomes. To buy in Sydney and Melbourne, the average homebuyer would need a full six months of income to cover the tax bill, which is about six times more than it was a generation ago.

PropTrack senior economist Angus Moore said bracket creep has been an important driver of this increase in stamp duty as most states have the same tax brackets they had decades ago.

“That means that, as home prices have increased, these brackets now capture more homes at higher tax rates,” Mr Moore said.

“This process of bracket creep has seen us go from as few as 12 per cent of buyers paying a rate of stamp duty of 3 per cent or more in the early 1990s to 95 per cent today.”

Tom Panos says politicians have put stamp duty on the ‘too hard’ basket. Picture: John Appleyard

Property market commentator and The Block auctioneer, Tom Panos, said stamp duty makes it harder for young families to buy bigger homes and for people to move on from death and divorce.

“The whole economy is better when there is fluidity in the market,” Mr Panos said.

“Even if governments reduced the stamp duty, they would recoup it because there’s more transactions happening. But I think it’s a case of it’s been done like this for a while and for politicians, it’s a little bit of in the too-hard basket’.”