The stamp duty levy threshold being lowered in Western Australia will hit first home buyers in the pocket and end up pulling down the state’s average house price, believes one local broker.
Stamp duty is not levied in WA on the first $500,000 spent on a first home purchase, but the state budget – released Thursday – has revealed that threshold will drop to $430,000.
Perth broker Rael Bricker had not been too surprised at the budget announcement as he had been reading about the possibility of it happening in the local media recently.
But he said the “weirdness of it” is there are not a lot of properties under the $430,000 market so its unlikely first home buyers will be able to find one to buy, so will have to pay the stamp duty on top of their mortgage deposit.
Bricker predicted the average house price in WA will drop as sellers must take into account the extra cost buyers incur with the tax.
“It will make it tougher for first home buyers. They might be able to get together a 5% deposit and $1000 or $2000 for stamp duty, but they can’t afford more than that.
“People will need to pull down their house prices to accommodate.”
But there will be no significant change to house on the market over $600,000, he predicted.
Bricker accepted there is a need for stamp duty, although thought 5% is too high. The WA government hope to raise $500 million in taxes from lowering the threshhold.
“The government needs to generate revenue to manage housing infrastructure. There is a cost to do that and something has to cover it. Stamp duty is a good way of doing that – but a huge impost when paying 4 or 5%.
“I don’t think scrapping stamp duty all together is the answer – it’s necessary but maybe not at the level it is. If we didn’t have it they’d find another way to tax us.”
However, Bricker said the “most inequitous” tax is land tax, which land tax increased in the state budget by 10%. This comes after last year’s land tax rise of 12.5%.
“The more property you own, trying to save for retirement, the more land tax you pay. It doesn’t make sense,” said Bricker.
Treasurer Mike Nahan said the land tax increase would raise $72 million in the next 12 months and $334 million by 2018.
Bricker is pragmatic about the need for the taxes.
“On a state level they’re trying to balance the budget. I would hate to be a politician; they do a tremendously hard job. And as much as we like to criticise, those taxes are necessary for services and benefits. We hate it but it’s the best way of government raising revenue.”
But Laing+Simmons general manager Leanne Pilkington said first home buyers are already struggling and the country risks an entire generation missing out on a place in the property market.
“A no-brainer in this whole discussion is the removal of stamp duty. Notwithstanding the obvious advantages of its complete abolition, stamp duty exemptions for all first home buyers should be implemented without delay.
“Stamp duty has the effect of nullifying a potential deposit. What could be a suitable, conservative deposit for many first home buyers too often becomes a permanent barrier to entry once stamp duty is taken into account.”
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