Soaring stamp duty stings homebuyers up to six times more than a generation ago

Stamp duty is costing homebuyers up to six times more than it did a generation ago, with home prices outpacing pay packets over the past four decades.

New PropTrack-e61 Institute research found stamp duty costs have grown at least fourfold for median-priced homes in Australia’s capital cities compared to average incomes since the early 1980s. 

In Australia's largest property markets, Sydney and Melbourne, the cost of stamp duty for a median priced house equates to six months of the average full time salary.

Rising home prices and declining housing affordability have raised calls for governments to replace hefty stamp duty costs with smaller and more incremental land taxes.  

PropTrack senior economist Angus Moore described stamp duty as an inefficient tax.

“It discourages people from moving to homes that suit them," Mr Moore said.

"While the rise has largely been incidental, rather than an intentional increase in tax rates, stamp duty reform is critically needed to allow the property market to operate more efficiently."

How stamp duty has grown in each city 

Melbourne had the largest stamp duty increase over the period, recording a 6.1-fold increase from four decades ago. 

Source: e61 Institute, PropTrack

Homebuyers in Melbourne need to save $42,500 for the stamp duty on a median-priced home or the equivalent of six months of full-time income. 

In Sydney, homebuyers would have to fork out $44,500 or six months of full-time post-tax income for stamp duty, up 5.4 times compared to the 1980s.  

Mr Moore said homebuyers in Sydney and Melbourne needed to spend half a year’s worth of full-time income, a burden that has increased enormously compared to a generation ago.

While Brisbane homebuyers face a lower stamp duty burden, it remains 5.5 times higher than four decades ago. 

Brisbane owner-occupiers buying a median-price home were facing stamp duty costs of about $18,700 or 2.7 months of income, while investors could expect to pay $25,900. 

Stamp duty costs have also jumped 4.4 times higher in Adelaide; 4.5 times higher in Perth; and six times higher in Hobart. 

Dr Nick Garvin from the e61 Institute says housing affordability and availability is the challenge of our time. Picture: e61 Institute

Research manager at the e61 Institute, Dr Nick Garvin, said the research also highlighted the indirect impacts of stamp duty on other parts of people’s lives including whether or not they change jobs, and when they decide to have children.

“Previous e61 research highlighted that preventing job switching can weaken productivity which has flow-on effects on wage growth and inflation," Dr Garvin said.

"Overhauling the current stamp duty system has the potential to alleviate these pressures on individuals and the economy more broadly.

Desperate young woman sit on sofa at home calculates expenses feeling stressed about bank loan payments, lack of money, financial problems, thinking of unpaid taxes, bankruptcy, overdue bills concept

Stamp duty is costing homebuyers up to six times more than it did a generation ago. Picture: Getty

“Housing affordability and availability is without a doubt a challenge of our time.

"Governments and policymakers must consider the unpopularity of stamp duty, and the indirect impacts stamp duty has on various other parts of the economy and people’s lives."

Calls to reform stamp duty

Australia’s housing crisis has put a spotlight on the need to reform stamp duty.  

According to a McKinnon poll, housing costs – of which stamp duty is an important part – have caused one quarter of Australians under 40 to delay changing jobs. 

It also found that housing costs caused one-in-five people aged in their 30s to push back having children and prevented people of all ages from moving home.  

Source: e61 Institute, PropTrack

Real Estate Institute of Australia (REIA) president Leanne Pilkington said stamp duty is Australia’s most antiquated tax.

"It’s a tax property consumers can’t afford as interest rates and the cost of lending increases," Ms Pilkington said.

"Not only is it outpacing the rate of savings, but it also stops Australians from pursuing new housing options and job opportunities so it is an inhibitor to mobility.

"Stamp duty was a broken promise with the introduction of the GST and state governments continue to be happy to collect nearly $60 billion in stamp duty receipts on housing annually whilst at the same time griping about housing affordability and failing to build enough houses."

PropTrack senior economist Angus Moore said stamp duty was a large upfront cost for homebuyers. Picture: PropTrack

REIA research estimates stamp duty reform could increase supply of existing property by up to 4%.

The states reforming stamp duty  

Stamp duty is a big revenue raiser for state and territory governments, which is why there has been little appetite for change.  

However, the ACT has been leading the way on stamp duty reform, having started a 20-year journey in 2012 to phase out the tax. 

The territory has been slowly phasing out stamp duty while raising council rates, as part of a two-decade process to make it as equitable as possible for residents. 

Victoria made some in-roads on stamp duty reform last year when the state government announced plans to replace stamp duty with a property tax on commercial and industrial property transactions.  

The ACT is on a 20-year journey to replace stamp duty with increased council rates. Picture: Getty

However, residential stamp duty was not included in the changes.  

In NSW, the Minns state government scrapped the previous government's stamp duty reforms last year, which gave first-home buyers the option to pay stamp duty or an ongoing annual land tax when they purchased a property. 

Instead, the NSW government lifted the purchase price threshold for first-home buyer stamp duty exemptions from $650,000 to $800,000, and concessions from $800,000 to $1 million. 

There are stamp duty exemptions for most first-home buyers across the country, however each jurisdiction has its own criteria to satisfy. 

In lieu of abolishing stamp duty, various groups have been calling on state and territory governments to at least increase the stamp duty exemption and discount thresholds to reflect modern home prices.  

For example, the median home price in Sydney was higher than the state’s new exemption and concession thresholds, reaching $1.057 million in January this year, according to PropTrack’s Home Price Index.  

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