Where stamp duty costs have risen the most

Homes in scenic locations offering more space, water views and lifestyle amenities have surged in both popularity and price during COVID-19, often adding tens of thousands of dollars to the stamp duty bill.

Remote working arrangements have given many the flexibility to relocate outside the city centre, sparking renewed debate about the suitability of a tax that disadvantages those who move around.

PropTrack data shows the cost of stamp duty has doubled in several popular regional locations over the past year, while some luxury seaside suburbs have recorded a six-figure increase.

Use the interactive below to see how much your suburb pays in stamp duty

PropTrack economist Anne Flaherty said stamp duty is an inefficient tax that needs to be reformed.

“The reality is because property prices have increased so much over recent years, that stamp duty component has likewise increased,” Ms Flaherty said.

“Buyers now are paying more in stamp duty as a proportion of their income than they were in the past.”

By acting as a disincentive to sell and buy a new property, Ms Flaherty said stamp duty also limits the supply of properties that come up for sale.

“We know that a reduction in supply has implications for prices by not having enough properties out there for sale to meet the demand of buyers,” she said.

“By providing a disincentive to move you have people who are living in properties that don’t suit their needs. A classic example would be someone who might be looking to downsize but if they sell their current property and move to a smaller property, they’re facing that new stamp duty tax to move to a different property.” 

Where stamp duty has risen the most

Ms Flaherty said many of the areas that have recorded the largest increases in stamp duty have also seen significant price appreciation.

However, she noted ‘bracket creep’ was also a major factor.

“Depending on the price of property, there are different tiers of stamp duty that you will pay,” she explained.

“Because prices have appreciated so quickly, a lot of properties have moved up into higher tax brackets.

“What that means is that people are paying a higher proportion of stamp duty on their properties than they were just a few years ago.”

Ms Flaherty said this can be seen in the Darwin suburb of Muirhead, which recorded the nation’s largest jump in stamp duty fees over the 12 months to October.

“If you look at a lot of suburbs in the Northern Territory which have seen incredibly enormous increases in stamp duty, they’re the ones in those mid-500,000s [median],” she said.

PropTrack data showed the median sale price of a home in Muirhead grew from $350,000 in October 2020 to $550,000 in October 2021, pushing it into a higher tax rate. As a result, the suburb recorded a fivefold jump in the average stamp duty figure.

“In the Northern Territory, a property that’s $524,000 has a substantially less large tax burden than one that’s $525,000.

“That’s because you’ve got that $525,000 threshold. As soon as the prices jump above that amount, the stamp duty burden is substantially higher.”

“That accompanies that story of why this tax is so inefficient. The fact that a lot of these suburbs that have seen such enormous rises are what you would consider more affordable suburbs also shows that burden to people, first-home buyers who are trying to get into the market that are now facing these higher burdens.”

Bracket creep was also a driver of huge stamp duty increases in popular beachside suburbs along Queensland’s south east, with houses in Warana on the Sunshine Coast recording a 109% increase in average stamp duty cost to $43,213.

“In Queensland, bracket creep has been the primary driver of the significant stamp duty jumps seen in many suburbs,” Ms Flaherty said.

“The majority of the suburbs which have seen the largest stamp duty increases in Queensland are those with medians that have hit the $1 million median over the last 12 months.”

Data from realestate.com.au showed the median house price in Warana surged to $1.2 million in the 12 months to October, up from $775,000 a year earlier.

In New South Wales, properties located along the coast recorded the biggest jump in average stamp duty costs. Kembla Grange in Wollongong saw the state’s largest increase, rising 173% over the past 12 months. Stamp duty doubled in the Newcastle suburb of Teralba.

Stamp duty fees surged in Victoria’s Mornington Peninsula, with buyers paying an additional 79%, or $41,498 on average, in stamp duty for houses in Somers. Units in Carlton saw a 76% rise in stamp duty.

Waterfront suburbs in Perth recorded the largest rise in Western Australia with homes in Bicton incurring an extra 47% in stamp duty than a year ago. Further south, houses in Quindalup recorded a 46% jump, with buyers paying an average of $37,723 more in stamp duty.

In South Australia, stamp duty levies rose the most on average in leafy city fringe suburbs, with a 70% increase in Goodwood. Homes in the Burnside region also features heavily in the state’s top ten, with levies in Linden Park and Beaumont rising by 65% and 56% respectively.

“One of the trends we saw during COVID was that a lot of buyers looked to move into more scenic areas, particularly areas close by the water. That means that median prices in these suburbs have risen and correspondingly stamp duty has also risen,” Ms Flaherty said.

“What is interesting is that when you look at these percentage increases, the percentage increase in stamp duty is substantially higher than the percentage increase in the median price of a property.

“A property might have increased 15% in median prices over the past 12 months but if it’s pushed into that higher bracket, there’s going to be a disproportionate increase in the stamp duty cost relative to the actual increase in the property price.”

The data shows how price changes have affected median stamp duty payments using current schedules. Suburbs that had a stamp duty increase below $10,000 were excluded from the list.

Calls to reform ‘inefficient’ tax

Stamp duty has widely been criticised as Australia’s most inefficient tax because it acts as a disincentive to move, often causing people to live in homes that don’t suit their needs.

Real Estate Institute of Australia president Adrian Kelly said for empty nesters, the prospect of paying tens of thousands of dollars on stamp duty for a home they may only need for five years means less properties will be placed on the market.

“We’re in a high demand environment with very low supply and prices are rising. That’s due to stamp duty not only at the beginning of the cycle for first-home buyers but also at the other end of the cycle for retirees,” Mr Kelly said.

REIA and SQM Research analysis released in October found stamp duty as a proportion of average national earnings rose from 25.1% in 2012 to 34.3% in 2021. In Melbourne and Sydney, stamp duty costs represent nearly half the average annual income, at 48.9% and 46.3% respectively.

“Essentially you’d have to save half a year’s salary just to pay your stamp duty in those two big cities,” Mr Kelly said.

“In some of the smaller capitals it’s still a third of a year’s salary, which is a sizeable amount of cash for those people to fund, particularly when salaries aren’t rising but the amount of stamp duty is.”

The analysis showed stamp duty as a proportion of median property prices has also risen over the past decade in most capital cities, except Canberra and Darwin, from 3.2% in March 2011 to 4.2% in March 2021 as a result of bracket creep.

While prestige properties attract the highest stamp duty premiums, Mr Kelly said first home buyers are often the most impacted.

“First-home buyers are the ones being impacted because not only is the deposit gap now much larger than it was two years ago because of rising house prices, so is the amount of stamp duty they need to find because stamp duty is a percentage of the sale price,” Mr Kelly said.

While most states offer exemptions and concessions to first-home buyers, Mr Kelly said eligibility price thresholds hadn’t kept up with surging property prices.

“They were capped but now most of those thresholds are useless because prices have moved on since those thresholds were put in place,” Mr Kelly said.

Stamp duty concessions and exemptions are available in most states, with some offering discounts for off-the-plan or newly built homes, while Victoria is offering temporary concessions within the City of Melbourne in an effort to revive the hard-hit CBD.

Grattan Institute economic policy program director Brendan Coates said the economic case to get rid of stamp duty is ‘watertight’.

“A big one-off stamp duty payment is pretty prohibitive,” Mr Coates said.

“It deters families from moving house to a location that better suits their needs, including looking for a new job. So it does make housing affordability harder,” Mr Coates said.

He said a land tax would be the most efficient levy available.

“Because you pay the tax irrespective of how you use the land, it doesn’t distort people’s choices. It doesn’t distort how people choose to live and how to invest and how they work. That’s the holy grail as far as economists are concerned.”

Stamp duty a major revenue driver for governments

Stamp duty is a significant income stream for the states and territories, earning them billions of dollars in revenue annually.

Since the amount of income fluctuates with housing market activity, Ms Flaherty said it can be a volatile source of revenue.

“That means that in a year when fewer properties hit the market and sell, that’s going to be a dip in revenue for the states and territories.

She said a broad-based land tax would make it easier to predict the amount of income coming in in any given year.

“The other thing is that it takes into account the changing value of land,” Ms Flaherty said.

She said the big challenge is how you pay for the transition.

 “From the state and territory governments’ perspective, transitioning from stamp duty to a land tax is going to cause a significant dent in their coffers over the short term,” she said.

“In the long term it is actually better for the state and territory governments because they will have a more predictable source of revenue [rather] than relying on stamp duty which fluctuates with the market.”

Plans to phase out stamp duty

The ACT has already committed to phasing out stamp duty in place of a broad-based land tax, over a 20 year transition that began in 2012.

The NSW government in 2020 proposed a similar model, with a progress paper released in June 2021.

Under the NSW proposal, stamp duty would be phased out through an opt-in model, where buyers would be given the choice of which tax to pay.

Mr Coates said the NSW model does open up big budgetary challenges.

“The reason they’re keen on it is because other than the budget impacts, the politics to transition are easiest because you’re not asking anyone to pay stamp duty unless they choose to,” he said.

“A consequence of that is that there is a big budgetary implication, particularly in the short term, from giving people choice because you give up all the stamp duty revenue in year one and you replace it with a land tax that may give you an equivalent value but is only collected over the course of 20 to 30 years.

“Whereas schools, hospitals, police have to be funded each and every year between now and then.”

Mr Coates said the ACT model – which involved gradually phasing down stamp duty and gradually ramping up land tax on everyone – better balanced the politics with the budget reality.

Budgetary impacts, Mr Coates said, is the reason other states are reluctant to take on such big reforms.

“If the federal government set up a program that said that they would reward states that do these kinds of reforms, I think the chances of it happening are quite high,” he said.

Mr Coates said the Grattan Institute estimated that if all states and territories replaced stamp duty with a broad-based land tax it would leave Australians up to $17 billion a year better off.