Why it’s time to get rid of stamp duty
Older Australians are living in their home years longer than is suitable for them, or their stage of life, because they fear market uncertainty and the costs associated with selling. Delaying this downsize is eating into their super and locking younger families out of the market, writes Adam Rigby.
For an empty nester, it can stop them from making a move into the correctly sized home, but it can have similar impacts just for someone moving between two similar properties. It was less of an issue when prices were growing so quickly as profits covered it, but if you bought a property and its value has stayed flat (or worse decreased), stamp duty could be the main reason for not moving as moving between two similarly valued homes becomes expensive.
If less people are selling, it makes it harder for first home buyers to enter the market and isn’t great for the economy in general coming out of this.
Already, in the last month we have seen a 28.7 per cent decrease in sales volume compared with 2019, a year that was already substantially down, compared with previous years.
In NSW and Victoria alone, two states looking at dumping stamp duty, there are more than 100,000 underused houses – that’s one person living in an otherwise empty six-bedroom house.
The increased expenses associated with running these homes is dangerously eating into retirement funds and locking families and first home buyers out of the market.
The latest ABS data showed that 49 percent of Australians are living in “underutilised” dwellings – in houses with two or more empty bedrooms – a number that has increased throughout the property downturn last year and has now spiked with the drop in sales volume led by the COVID-19 outbreak.
This stalemate has been going on for the last 18 months or more.
Seniors keep delaying a downsize because they are unsure about the market and they know they will be slugged with a huge tax.
Australia is unique in the world in terms of property transaction costs. For example, our friends across the Tasman in New Zealand do not pay stamp duty for property transactions, so the financial barrier to move is much lower.
The high cost of sales transactions and stamp duty urgently needs to be addressed if the government is serious about improving affordability and assisting in the nation’s economic recovery.
In Victoria, home owners who pay $680,000 for a home have to come up with a further $35,870 in stamp duty. In NSW, home owners buying for the same amount have to pay $26,032 in stamp duty. In Queensland, the stamp duty on a home of the same price is $16,450.
By Adam Rigby, founder and CEO, Upside
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