The Real Estate Institute of NSW has labelled the State Government’s proposed changes to property taxes “nonsensical”.
REINSW Chief Executive Officer Tim McKibbin said that the idea of adding a new type of tax won’t help ease housing affordability issues, which are already a huge burden on NSW residents.
Under the proposed changes, homebuyers would be given the option of paying either an upfront stamp duty or an ongoing land tax for the length of time they own the property.
Mr McKibbin said the changes wouldn’t ease pressure on house prices but simply move the cost to other segments of the market.
“You can’t tax something to make it cheaper,” Mr McKibbin said.
“There’s the potential for the property tax to create a two-speed market. A purchaser can choose to pay stamp duty or the property tax, but if it’s the latter, a future purchaser won’t have the same choice, as the property will have already entered the property tax regime – and there’s no way out.
“It will upset demand for that property. Potential buyers must be willing to pay the property tax, whereas other properties will still offer a choice, and therefore be in greater demand.”
Mr McKibbin said for existing homeowners who paid stamp duty, there would be a disincentive to sell and buy again as they’d have to pay the property tax.
“Affordability is inextricably linked to supply,” Mr McKibbin said.
“Disincentivising people from selling is at direct odds with freeing up available housing stock.”
According to the Progress Paper for June 2021, stamp duty was introduced in 1865 and in recent years has outpaced property prices and incomes.
The NSW Government is expected to rake in $14 billion from stamp duty this financial year, and Mr McKibbin said they are addicted to high property taxes.
“Stamp duty tax brackets have not changed since 1986 and by not adjusting for CPI, more and more properties are subject to higher rates,” he said.
“It’s disingenuous of government to talk affordability while raking in billions each month in stamp duty from property consumers.
“Even so, at least with stamp duty, while it’s a huge impost, once it’s paid, it’s done. The burden of a property tax is forever.
“If government is genuine about helping first home buyers, the answer to affordability is additional supply, a much-improved DA process and tax cuts. Given 40 per cent of the cost of a new property is taxes and charges, a serious discussion about affordability should start there.”
According to Mr McKibbin, the REINSW would like to see first home buyers exempt from paying stamp duty and relief for empty nesters, to encourage them to downsize and free up homes for growing families.
“People go to work knowing they have to pay tax, but it doesn’t stop them going,” he said.
“By contrast, people choose to stay in a property that doesn’t meet their needs, especially retirees, because they don’t want or can’t afford to pay stamp duty.
“When a tax becomes a consideration of a transaction, it’s a bad tax. That’s what stamp duty already does and that’s what a property tax will do. Swapping one bad tax for another won’t help affordability.”
