What Do We Want? Stamp duty Changes. When Do we want them? Now.
It is on everyone’s mind, the most obvious choice for tax reform at the state level: stamp duty. The Victorian Treasurer, together with his New South Wales counterpart have both recently made public comment on the need to consider reform to stimulate activity in the property market.
The only problem is: while politicians, real estate agents and potential buyers and sellers are all talking about it, but there is no action. The rumour of change is paralysing the market that is craving reform since wholesale changes were made in 2017 with limited industry consultation.
Ever wondered what came first – the Chicken or the egg? Which was the cause, and which was the effect? At the moment we are witnessing dramatically reduced sales volumes which are leading to reduced stamp duty collected revenue. However, if we had reduced stamp duty levies, this would likely lead to increased sales volumes. Rather than the government focusing on the consequence of Stamp Duty reform – focusing on the outcome, might be more prudent.
Why do we need increased sales volumes? Without sales…. the wheels stop spinning and not just for developers. As no more evident during the Covid-19 restrictions – over 10% of Australia’s workforce work within the industry identified as construction / property. The activity of transactions, be it established or off the plan property creates many offshoots of activity – but it always – always, starts with a transaction which then stimulates economic activity, which should be a government priority.
Want to develop a building? Highly likely you will need sales to satisfy your lender. With current stamp duty levies and the trend towards higher value owner-occupier downsizer focused developments – there is no stamp duty saving in place, such as at Samuel Property’s Edition Toorak, Caspian Hampton, and upcoming Willow Brighton developments. No financial motivation from a tax relief advantage, like there was pre 2017 changes for a buyer to commit to that purchase.
Then we are back to the Chicken or the egg? Want to downsize to an apartment. It won’t happen without sales, but sales will be considerably slower without Stamp Duty reform providing an impetus for a buyer. With sales at a 30 year low nationally, state governments are all looking at historically low revenues from stamp duty, at a time when all other taxation revenue, from payroll to casino taxes are all threatened from lower trading volumes.
If changes are made to Stamp Duty, what changes should be considered ? For starters – revert to pre 1 July 2017 conditions where there was no cap on the dutiable value and owner’s status – be it principal place of residence, investor or first home owner are no longer taken into consideration. This alone would provide a jolt to those considering purchasing property off the plan. If changes were considered to established property – then that would only further stimulate, but typically those buying off the plan will then be selling an established property or creating a rental property (that previously was not available) – so there are still benefits.
Ultimately - the market needs certainty and it needs confidence. Uncertainty is the bane of decisiveness. Property and construction are enormous contributors to our economy, indecisiveness when it comes to a policy that affects every buyer is putting the brakes on the industries millions of people nationwide depend upon. A brave government will decide they’d prefer less of more, rather than more of less and lead from the front.
