Laing + Simmons Managing Director and incoming REINSW President, Leanne Pilkington has penned a cautionary memo to the NSW Government telling them, they cannnot continue to dine out on NSW stamp duty revenues – highlighting the issue of housing affordability in the state, particularly in Sydney.
Here is the full release:
MEMO TO NSW GOVT: YOU CAN’T DINE OUT ON STAMP DUTY FOREVER
December 13, 2016: The NSW Government is expected to pocket $4 billion in surplus, thanks in no small part to the cash-cow that is stamp duty, but Laing+Simmons Managing Director Leanne Pilkington warns the revenue party may soon be over, as more and more people simply can’t afford to move.
The exorbitant cost of stamp duty in NSW is the most significant barrier to the purchase of property in this state, Ms Pilkington says, and it’s putting increased pressure on property prices.
This is because for many people it’s cheaper to stay put and renovate than move, reducing the amount of stock on the market, irrespective of the number of new developments springing up in certain areas.
“Stamp duty is one of the most significant influences on property price growth in NSW. It contributes to fewer listings, so transactional activity suffers, and the flow-on impacts are felt down the supply chain: household goods suppliers, homewares retailers, white goods manufacturers, the list goes on,” Ms Pilkington says.
According to CoreLogic RP Data, the amount fresh housing stock being added to the market has been consistently and substantially lower than the past two years, with the shortage of advertised stock most pronounced in Sydney.
Total advertised stock levels are currently 10.2% lower than a year ago and there are approximately half as many advertised properties on the market compared to the 2011 peak of over 40,000.
“As well as holding back fresh stock and fuelling unsustainable price growth, stamp duty also jeopardises employment opportunities in the real estate industry as reduced transaction volumes means agents simply aren’t able to employ new people,” Ms Pilkington says.
“Stamp duty is a short term revenue booster with disastrous long term consequences that we are already seeing play out, most noticeably in the affordability crisis we are currently faced with.”
Ms Pilkington says the Treasurer’s claim that the NSW Government is improving housing affordability by focusing on new supply to put downward pressure on prices is fundamentally flawed.
CoreLogic RP Data recently reported the median dwelling price in Sydney rose 13.1 per cent in 2016 to $845,000. This would incur stamp duty of $33,515, exclusive of mortgage and transfer fees.
Regardless of an individual’s financial circumstances, incurring such a cost simply for the right to participate in the market is unreasonably excessive, Ms Pilkington says.
“While the Government has dined out on stamp duty so extravagantly in recent times, it has had a pronounced flow-on impact that is already coming back to bite,” Ms Pilkington.
“This is a tax that must shoulder the majority of the blame for the critical housing affordability issue that the people of NSW face more than those in any other state. The NSW Government cannot rule out stamp duty reform forever if it serious about helping people, especially young people, enter the property market.
“It’s not as if a leap of faith is required. There is a clear precedent for the NSW Government to refer.
“When the Northern Territory and West Australian Governments reduced stamp duty, revenues increased as a direct result because of volume increases.
“I’m convinced that a reduction in or, ideally, the abolition of stamp duty would see an influx of properties come on the market. This in turn would place genuine downward pressure on property prices and would have the most meaningful impact on affordability.
“Stamp duty is a tax that people have to pay for no service in return. It’s also a tax that in many cases turns what would otherwise be a reasonable deposit into an amount insufficient enough to even obtain a loan.
“It’s interesting that the NSW Government has foreshadowed a slowdown in the property market and reduced surpluses in the years to come, yet steadfastly refuses to consider a measure with the very real opportunity to fuel new economic activity.
“Continued inaction and the refusal to implement stamp duty reform may see the reduction in state revenue be much more alarming than currently expected,” Ms Pilkington says.
Premier Mike Baird has recently stated (October 2016) his government was not considering scaling down stamp duty in exchange for a land tax as was suggested by NSW Finance Minister, Dominic Perrottet.