Property News, Insights & Education

    The housing tax that’s having a real impact on the lives of Australians

    • Stamp duty is costing home buyers up to six times more than a generation ago
    • New research shows the state and territory government tax is also having largely unforeseen consequences on the economy and the lives of Australians.
    • The research shows that housing costs - including large stamp duty fees - are helping to prevent people from changing jobs, downsizing to more appropriate accommodation and even affecting decisions as to when couples decide to have children.

    Australia’s state and territory governments are having a disproportionate effect on citizens’ lives and distorting the housing market, because of their budgetary addiction to higher and higher stamp duty costs.


    New research from REA Group’s PropTrack and economic think-tank, the e61 Institute, shows the state-imposed tax is costing property buyers up to six times more than it was a generation ago, acting as a significant upfront cost and a barrier to people entering the housing market.


    An eye-watering increase…


    Stamp duty historical_Feb 12 2024


    The study, “Stepped on by Stamp Duty”, finds that in Sydney, the stamp duty on a median-priced home is equivalent to $44,500 or 6 months of average full-time post-tax income.


    That’s 5.4 times higher relative to incomes than it was in the early-to-mid 1980s.


    It’s worse in Melbourne.


    PropTrack and e61 found buyers in the Victorian capital need the equivalent of 6 months of full-time income to cover the $42,500 of stamp duty needed for a median-price home – a 6.1-fold increase from four decades ago and the largest increase of any city.


    With Queensland’s various concessions for owner-occupiers, the stamp duty on a median home in Brisbane is equivalent to $18,700 or 2.7 months of income


    However, that’s 5.5 times higher than the situation four decades ago.


    Investors will find themselves paying around $25,900 or 3.7 months of income.


    The study also finds stamp duty on a median-priced home for an owner-occupier is 4.4 times higher, relative to income, in Adelaide, 4.5 times higher in Perth, and 6 times higher in Hobart than in the early to mid-1980s.


    Stamp duty Dec 2023_Feb 12 2024


    “Stamp duty is very costly,” says PropTrack Senior Economist Angus Moore.


    “Home buyers in Sydney and Melbourne must spend half a year’s worth of full-time income, a burden that has increased enormously compared to a generation ago.”


    “The rise has largely been incidental, rather than an intentional increase in tax rates,” says Mr Moore, a proposition that many in the housing industry, the welfare sector and the broader community would challenge.


    The report itself says there is “no specific policy change to blame, just housing prices out-pacing income as well as stamp duty bracket creep.” 


    However, there would be an overwhelming agreement with Angus Moore’s contention that “stamp duty reform is critically needed to allow the property market to operate more efficiently.”


    But wait, there’s more…


    Not only does the study from PropTrack and e61 look at the explosion in stamp duty costs, but it also delves into the consequences of the insidious tax.


    “Our research also highlights 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,” says Dr Nick Garvin, the Research Manager at the e61 Institute.


    People affected by housing_Feb 12 2024


    PropTrack and e61 cite a recent McKinnon poll on housing that surveyed more than 3000 Australians, and the findings are, frankly, shocking.


    It shows that housing costs have caused one-quarter of Australians under 40 to delay changing jobs and caused more than one in five 30 to 40-year-olds to delay having children.


    The poll also found people of all ages are being prevented from moving (whether that might be to more appropriate sized housing or to be closer to schools, family or a workplace) by housing costs.


    As the report says, “housing costs comprise more than just stamp duty, but five months of take-home income is a sizeable cost.”


    Worryingly, the research also finds that in Australian cities, high stamp duty is deterring close to a quarter of people (usually older “empty-nesters”) from downsizing.


    “In a housing shortage, downsizing benefits everybody,” the report states. 


    “The downsizers benefit from a better-suited home.”


    “Everyone else benefits from the previously underused housing becoming available.”


    e61 Research Manager Dr Nick Garvin says high stamp duty costs are also having unforeseen economic consequences, such as helping to prevent many Australians from moving to places where they can find better employment.


    “Previous e61 research highlighted that preventing job switching can weaken productivity which has flow-on effects on wage growth and inflation,” he says


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


    Australians agree


    Housing Policy_Feb 12 2024


    An interesting result of the McKinnon poll is that many people actually seem to know how much stamp duty is affecting them.


    It shows that abolishing stamp duty is the top priority Australians want their state governments to tackle, even more than abolishing land tax or building more public housing.


    “Housing affordability and availability is without a doubt a challenge of our time,” says Dr Garvin.


    “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.”