Implementing the Productivity Commission’s recommendation to scrap stamp duty would increase housing affordability and boost transactions, cutting the average holding time of a house from 13 to eight years, according to the property industry.
The chief executive of one of the largest developers in Australia, Mirvac’s Susan Lloyd-Hurwitz, welcomed the Commission’s recommendation to replace stamp duty with a broader-based land tax.
“We would support such a change, however we also recognise the challenges in implementing such a change,” Ms Lloyd-Hurwitz said on Tuesday.
Deloitte Access Economics research commissioned by the Property Council suggests swapping residential stamp duty for a land tax would provide a $3.3 billion boost to GDP but, with an average cost to households of about $2,360 a year, is not politically feasible.
In its latest productivity review, the Commission suggested a shift to land-based taxes should include provision for low income households to defer property taxes so they could be funded from an estate at death or after a sale.
Property Council chief executive Ken Morrison said stamp duty was a “monster” tax that trapped people in homes that were a poor fit for the size of their families.
“The economic efficiency arguments for a stamp duty/land tax swap are well understood, but the problem is the mountains of stamp duty money the States are sitting on,” Mr Morrison said.
In Sydney stamp duty for the average house is about $51,000 and just under $30,000 for apartments.
Urban Development Institute of Australia chief executive Steve Mann said first homebuyers in Sydney, after saving an average of eight years for a deposit, face up to $30,000 in upfront stamp duty costs (even with the current first home buyer discount).
“One third of the costs of a new home is government taxes, levies and charges; removing stamp duty would increase development of new homes and improve affordability,” Mr Mann said.
“In Sydney, 60 per cent of people between the ages of 60-69 live in homes that have two or more spare bedrooms. Replacing stamp duty with land tax would remove a barrier for many Australians which prevents them from downsizing,’ he said.
Laing+Simmons managing director and President-elect of the Real Estate Institute of NSW, Leanne Pilkington, said removing stamp duty would greatly assist the proper matching of demographics to property.
“The take-out of the report is clear: residential stamp duty has no role in the Australian cities of the future – or the present, for that matter,” Ms Pilkington said.
“We need to move to a fairer system that removes barriers for those who may be looking to upgrade to larger homes, downsize to smaller homes, or get into the market to begin with,” she said.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.