by Damian Collins – REIWA President https://reiwa.com.au/
If you’ve ever purchased a property, you’d be well aware of what a financial impost stamp duty is.
Widely regarded as inefficient, stamp duty presents a significant hurdle for first homebuyers, trade-up buyers and downsizers throughout their property journey, impacting immensely on affordability. It can be as much as 5% of the purchase price of a property.
As part of its “What about WA?” federal election campaign, REIWA is calling for all federal political parties to commit to providing funding for states and territories to undertake a full feasibility study into how phasing out stamp duty could be achieved if elected.
For most buyers, stamp duty eats away at their deposit for a property, meaning they are forced to borrow this amount on top of the loan to purchase the property. This means they are paying interest on the stamp duty cost across the whole life of their mortgage.
For example, if a family saves $50,000 for a home deposit, which is no easy feat, and is looking to buy a home at the current median house price of $512,000, $18,783 of that deposit will go towards stamp duty.
That family has now lost nearly 38% of their deposit and they will need to borrow more. In addition, they will almost certainly be required to take out Lenders Mortgage Insurance, which will cost them another substantial amount on top of their loan.
This not only hinders affordability, it impacts the ability for households to make appropriate housing decisions in accordance with their lifestyle choices, changing needs or economic reasons like employment.
Stamp duty is also not the lucrative tax it once was for the Western Australian Government. Transactional activity in WA has declined considerably in recent years, with the number of annual property sales falling from over 71,000 in 2013 to less than 40,000 in 2018 – the lowest level of transactions recorded since 1990. This has impacted significantly on the state, with far fewer transactions resulting in far less stamp duty revenue for the WA Government.
By abolishing stamp duty and implementing a broad-based land tax system, the cost of property taxes would be spread across many years, creating a steady stream of reliable income for state and territory governments.
It would also remove the upfront financial burden from homebuyers, helping to make homeownership a reality for more Australians.