Stamp duty concessions key to achieving housing goals: Damian Collins

GUEST OBSERVER

Stamp duty concessions, including exemptions for downsizers and adjustments for off-the-plan buyers, should be incorporated in the WA state budget to tackle Perth’s failing housing targets. 

With the release of Perth’s long-term planning blueprint in 2011, there was a clear objective to reduce urban sprawl by driving higher-density housing options in established areas as the city’s population grows to over 3.5 million people.

Since then, we’ve seen changes in the types of housing being constructed in metropolitan Perth with an increase in multi-residential complexes, rather than the traditional trend of single dwellings.

This has been driven by a shift in buyer attitudes towards apartment living as well as many councils adopting planning schemes that are conducive to higher-density housing.

However, it’s clear that more needs to be done as Perth’s infill development continues to fall short of the state’s target of 47 percent.

Initiatives key to reaching housing goals

Two initiatives that are conducive to the state’s long-term planning targets are the exemption of transfer costs for downsizers and the modification of stamp duty for off-the-plan purchases.

These concessions should be included in the WA budget, scheduled for May 12, to incentivise buyers to continue to move into high density housing and, in turn, support the state reach its infill targets.

1. Exemption of transfer costs for downsizers

The introduction of a one-off stamp duty exemption for people over 65 who are selling their family home to downsize.  The exemption should be available in any cases where the family home sells for less than $1 million and the buyer purchases a property of a lesser value. Given that many retirees are hesitant to downsize because of the high stamp duty costs involved, a one-off exemption would provide a significant incentive to move to a smaller residence, possibly in a higher-density complex. It would also help free larger blocks in established areas for development of more higher-density housing options.

2. Modify how stamp duty is applied for off-the-plan purchases

Changing the way stamp duty is applied to off-the-plan purchases will drive more buyers to higher-density housing options. An effective method, which is utilised in other Australian states, is to charge stamp duty on the value of the land alone, rather than the combined value of the land and the dwelling. For example, take a developer who acquires a development site for $1 million and then seeks to build 30 apartments on the site.

This would make the value of the land of each apartment worth approximately $33,000, which a potential buyer of one of the apartments would then pay stamp duty on. This should only be applied to off-the-plan purchases made prior to the start of construction. Any apartments purchased after the start of construction would have to pay stamp duty on the full price of the land and dwelling.

Such an initiative would incentivise buyers to purchase high-density housing options during presales, because they save on the stamp duty. It would also assist developers attain finance for these projects, as lenders typically require about 60% of apartments sold as presales before approving funding.

Without further impetus for buyers to move to high-density housing, Western Australia, and more specifically Perth, risks falling significantly short of its key housing goals.  

Such stamp duty concessions are a swift and low-cost lever the Barnett government can pull in its forthcoming budget to help realise its long-term planning blueprint.

Damian Collins is the founder and managing director of Momentum Wealth and can be contacted here.