Up by 40%: Sydney’s new housing crippled by taxes
Sydney’s tax values have increased by nearly 40 per cent in five years, now accounting for half of the cost of new housing.
Tax and red tape in Sydney’s housing industry have increased by 38 per cent over the past five years, accounting for $576,000, or half, of the cost of a new house and land package, a new report revealed.
The study from Centre for International Economics (CIE) was commissioned by the Housing Industry Association and was an update of the previous 2019 analysis.
The report found that housing taxes nationwide have worsened, impacting further buyers’ affordability.
In total, the study found that the housing sector contributes to $51 billion in taxation revenue nationwide yearly, through land tax, stamp duties, council rates, and other taxes on immovable property.
Despite providing only 11 per cent of the economy-wide gross value added, dwelling ownership and housing construction represent 14 per cent of total GST revenue.
Since 2019, Sydney’s government taxes, regulatory costs and charges have increased by $160,000, now reaching $576,000.
Similarly, the cost of taxes, regulations and charges for new apartments has increased by 38 per cent since 2019 to $346,000.
HIA chief economist, Tim Reardon, said Sydney’s housing taxes and red tape put financial pressure on new home buyers.
“In Sydney, governments are adding in excess of half a million dollars to the cost of a new home, that new home buyers are then required to repay for decades as part of their mortgage,” Reardon said.
“With half of the cost of a new home being taxes and government charges, new home buyers are spending 15 years of a 30-year mortgage just paying off that tax.
“New home buyers also have to pay interest on top of that tax. Over 30 years, the value of taxes plus the interest on it amounts to more than the value of the home itself.”
While Sydney has the country’s highest housing tax cost, Brisbane recorded the largest increase over the last five years, up by 106 per cent or $179,000.
Brisbane’s government taxes, regulatory costs and charges now account for 32 per cent of the total outlay for new houses and 34 per cent for units.
In Melbourne, regulatory costs, statutory taxes and excessive charges represent 37 per cent of the total cost of new houses and 35 per cent of the total cost of units.
Similarly, Perth’s new house tax values account for 33 per cent, while regulatory costs, statutory taxes and excessive charges represent 32 per cent of unit prices.
Adelaide has seen nearly 30 per cent of its new builds cost go towards taxes.
“In Brisbane and Adelaide, government taxes, fees and charges on new homes have doubled in five years. Not even the best legitimate investment strategies could achieve that same level of return,” Reardon said.
Additionally, the report found that regulatory red tape was an added challenge, with development approval for a subdivision taking over a year to obtain, including over seven months of “unnecessary delays”.
“Delays on getting approvals take much longer than the time it takes to actually build a home.”
Reardon said the Australian housing shortage crisis won’t be resolved if the government does not tackle taxes and regulatory paperwork delays.
“Taxes on housing have not resulted in more of them being built. Higher taxes on new housing will only lead to fewer new homes and higher prices for existing homes,” he said.
“It is incongruous that governments set home building targets while at the same time tax new home building even more. The more government tax new homes, the fewer homes will be built.”
“If governments are keen to solve the affordability problem, they need to look at the tax they are imposing on new housing,” Reardon concluded.