Stamp duty taxes need to be eliminated – and first home buyer grants do little to bandage the wound, according to some industry spokespeople.
A recent opinion piece by Robert Carling in the Australian Financial Review claims state governments enjoy real estate booms because rising prices and turnover combine to send stamp duty revenue ‘gushing’ into the Treasury coffers.
“But the states’ reliance on this source of revenue is unhealthy and highlights the need to rethink how states are funded,” says Carling.
Tasmanian Smartline broker, Richard Denholm, largely agrees, saying stamp duty is ‘nefarious’ for first home buyers.
“For the first home buyer, it’s a big barrier because normally they have LMI as well.”
His state government has recently increased its first home builder (FHB) grant to $30,000, something which Denholm believes will help alleviate some of the financial pressure on first home buyers, but says there are also likely to be some unwanted side-effects.
“I think for what the [Tasmanian] government’s trying to do, which is stimulating things, the grant will do that. It will cover the stamp duty and LMI; for some people it might eliminate stamp duty…There is quite a bit of stock on the market, so long-term it might have an effect by pushing up prices.”
Furthermore, he says, the FHB grant is only for purchases of newly completed properties, or for buyers that are planning to construct.
“An unintended consequence could be that properties in the bottom of the market - there could be a lack of movement there.”
However, Rate Detective Finance broker, Warren Dworcan, says policy makers would need to devise other ways of earning revenue before abolishing the stamp duty system entirely.
“It would be nice in that it would increase property activity, although state governments would need to find alternative ways to supplement the stamp duty revenue, which may cut into vital services so I’m not sure it would be viable.”
Dworcan also says the negative effects that stamp duty can have on first home buyer figures in particular varies from state to state.
“The various governments may lower it to increase activity or raise it to put more money into different areas so it affects people in many ways…It’s a lucrative way for state governments to bring in revenue to spend on their economy for progress. However, it’s a hefty cost for people buying a property.”