Stamp duty cut a solution to Australia’s new home building crisis
Nathan Mawby, Property Journalist
First published 12 March 2024, 12:24 PM
A Charter Keck Cramer report released today shows the city’s new apartment approvals will fall across the next three years, with the researcher behind it warning upfront tax costs is a chief reason.
The property industry market research leaders’ analysis states that while material costs have stabilised, ongoing high demand for labour is giving developers pause and Melbourne’s most affordable off-the-plan apartments, including one and two-bedroom homes, could see a 30 per cent price increase by the end of this year.
CKC’s Build to Sell and Build to Rent market report shows Australia needs to build 75,000 apartments a year to reach the federal government’s 1.2m home target for the next five years.
Nationally, we are projected to build fewer than 35,000 this year and even less in 2025 and 2026.
The firm believes only about 30,000 apartments are approved in Victoria today, the majority in city towers, and inner- and middle-ring complexes of six-storeys or less, with many of these on standby as developers wait for better conditions.
With Victoria the nation’s most expensive state for stamp duty at a time when it has an even bolder goal of building 800,000 new homes in the next 10 years, Charter Keck Cramer national executive director of research Richard Temlett said the tax had to go for locals and internationals alike.
Stamp duty is believed to sideline home purchasing decisions for investors and owner occupiers alike.
“Approvals are at decade lows … it’s an absolute disaster,” Mr Temlett said.
“And it’s not just because of the pandemic. It’s because incentives for off-the-plan homes have been removed.
“They need to make Victoria as attractive as possible to local and offshore buyers, and that means changing stamp duty.”
Failing to do so would leave the state building fewer new homes than otherwise would be possible, increasing demand for social housing.
“Victoria will have to go into more debt to fund this — it can’t just keep taxing and taxing,” Mr Temlett said.
He suggested the government could recoup similar amounts of revenue via land tax payments spread over 10-15 years.
However Ray White chief economist Nerida Conisbee said while wiping stamp duty for new homes would drive construction and offered economic benefits, the government might struggle to justify it, especially for investments, amid pressure on housing from the Greens.
Mid-rise apartments up to six-storeys in inner- and middle-ring suburbs are among the areas likely to see the most activity from apartment developers.
“They do need to do something, but the sticking point is they have no money and need more,” Ms Conisbee said.
She said a more likely result would be an increase in high-rise height caps to allow for denser building.
Mr Temlett warned he was also expecting a 30 per cent increase to off-the-plan apartment prices by the end of the year, adding $182,000 to the $607,000 Melbourne median unit price.
