The Real Estate Institute of NSW (REINSW) has criticised the Perrottet government’s strategy of combating housing affordability by implementing taxation.
In the eyes of institute chief executive Tim McKibbin, it is counterproductive that the government’s attempts to make “something more affordable” are to “replace one bad tax with another”.
Mr McKibbin has levelled his criticisms at the NSW government’s proposal that gives first home buyers the option to choose between stamp duty or a smaller annual property tax, which the government believes will benefit over 80 per cent of home buyers in the state.
“Approximately 40 per cent of the cost a consumer pays for a new property is taxes and charges. Reducing the tax burden and addressing the lack of supply is the most appropriate place to start the discussion about improving affordability,” he said.
He outlined that “until real measures are introduced to address the undersupply of housing, prices will remain out of reach for many aspiring first home buyers.”
“Excessive taxation not only inhibits purchasers, [but it also] inhibits supply, and today’s market is the result of decades of inertia when it comes to property taxation reform,” Mr KcKibbin said.
He recommended improvements to the development application process and clearer development guidelines at the local level as necessary to improve supply.
Citing that stamp duty tax brackets have not budged since the late 1980s and have not been adjusted for the consumer price index (CPI) throughout that time, he acknowledged that “more and more properties are subject to higher rates”, which has resulted in the NSW government pocketing $14.5 billion in stamp duty for the 2021–22 financial year.
Possible remedies to ease the affordability situation plaguing first home buyers outlined by the REINSW include exempting them from paying stamp duty to help them compete with other purchasers, and providing stamp duty relief for empty-nesters to encourage them to downsize and free up homes for growing families.
“Tax should be a consequence of transaction, not a consideration,” Mr McKibbin said. “Unfortunately, stamp duty is a significant imposition and, therefore, a serious consideration for people contemplating a property transaction.
“The irony in the stamp duty debate is that there’s empirical evidence demonstrating that by reducing the rate of tax, more transactions will flow, and the government will actually receive more tax revenue.”
He concluded that “swapping a bad tax for another solves nothing, especially for first home buyers”,
In addition to Mr McKibbin’s criticism, the NSW government’s reforms were denounced by stakeholders in regional pockets of the state who believe the legislative changes only benefit home buyers in the state’s capital.
The reform was introduced to State Parliament this week and, should it pass through both houses, will be implemented from January 2023.