Reduce burden of tax on housing before great Australian dream becomes a pipedream

For years governments have been lining their pockets at the expense of the housing market, and home buyers especially, to create the situation we have today. Affordability is at crisis point and the undersupply of housing cannot possibly meet the market’s needs.

The latest research highlights the absurdity of the taxation burden, particularly stamp duty, that the housing market in this country is faced with.

The CIE’s Taxation of the Housing Sector research report makes numerous alarming findings, including:

•  In absolute terms, housing is the second largest contributor of tax to Australian governments;
•  New housing accounts for around 1.2% of value added in the economy but contributes 2.8% of government taxation revenues;
•  Most of the burden or incidence of taxation on housing falls on home buyers;
•  The most inefficient tax is levied at a state level, namely stamp duty; and
•  Due to the inefficiency of stamp duties, a mere $500 million cut to this tax would create a $738 million benefit to consumers and up to a $51 million benefit to producers.

The research was commissioned by the Housing Industry Association ahead of next week’s federal government tax forum.

Next week’s forum provides a perfect opportunity for reform at the federal level to recognise the disproportionate burden the housing market is being forced to carry and support an industry that is so vital from an economic and social perspective..

Stamp duty is the single greatest hurdle to affordability, and as this latest research identifies, is highly inefficient. This unfair tax is preventing the residential market and the economy as a whole from benefiting from a range of positive impacts and its abolition cannot come soon enough.

Developers occupy a vital position in the market but the sentiment at present is that there is little to be gained by proceeding with new projects. Excessive red tape and associated costs of development is not reflected in the margins achievable and so we are left at a standstill.

The massive housing undersupply and consequential affordability crisis has the market at a tipping point. A multi-pronged approach to reform that seeks to encourage new supply and support affordability is necessary from governments at all levels.

Let us hope the tax forum recognises and responds to this crisis before the great Australian dream fades to become merely a pipedream for many people.