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Real estate industry leaders weigh in on stamp duty reform

Axing stamp duty, building more homes and expanding government assistance schemes are among the actions leading real estate bodies have called for under an inquiry into housing affordability and supply in Australia.

The House of Representatives Standing Committee on Tax and Revenue has received 126 official submissions regarding stamp duty reform so far with the Real Estate Institute of Australia, the Reserve Bank of Australia, REA Group, Domain and Raine & Horne all voicing their views.

Chair of the Committee Jason Falinski said the committee would “investigate the impact of tax and regulatory regimes on price, affordability, and supply of housing in Australia today as well as into the future”.

Public hearings for the inquiry will be held on a date to be confirmed.

Elite Agent has compiled a snap shot of the submissions of leading real estate groups.

Real Estate Institute of Australia (REIA) shares the ‘big three’ for housing inquiry action

The REIA shared the three fundamental components that would allow more Australians to achieve home ownership.

  1. Axe the tax

Remove punitive taxation on Australian homes and households. Stamp duty is a major deterrent for Australians who are struggling to buy a home and lower investor activity means upward pressure is placed on rentals.

2. Build more houses

From 2023 to 2025, on the back of a recovering economy and a return to normalisation of migration, new demand is expected to exceed new supply. REIA suggested this must be planned for by building more new houses, in order to deal with both supply and affordability.

3. Get government right

The state and federal governments must have a national plan for housing.

The REIA noted this should include the establishment of a government-led mechanism for reliable data on housing demand and supply, identifying targets and benchmark performance on housing supply, land release and national planning reform, with annual progress tracked and reviewed.

Housing affordability

The REIA also stressed that since the onset of the COVID-19 pandemic house prices had accelerated. The institute’s Real Estate Market Facts for the June quarter showed house prices had recorded the highest every quarterly jump at 18.4 per cent.

The institute also said the weighted average median house price across the eight capitals cities increased to $913,346 in the year to June. The REIA noted rental prices have remained relatively stable.

The submission also highlighted the findings of the institute’s recent Housing Affordability Report, which showed that since 2001, housing affordability was at its worst in September 2008, when 45.8 per cent of median income was required to meet home loan repayments.

Over the past 20 years, the weighted average proportion of income required to meet loan repayments has increased from 27.2 per cent in 2001 (a monthly loan repayment of $1,093), to 35.7 per cent in 2021 (a monthly loan repayment of $3,054). This is an increase of 8.5 percentage points.

The REIA also delved into its data on what type of homes Australian’s live in, showing that most Australian’s are owner-occupiers, but that first-home buyer activity had dropped recently.

According to REIA data, Australians primarily live in owner-occupied dwellings. Housing alternatives include:

  • Private rentals – 27 per cent of Australians
  • First home buyers – 15 per cent of Australians
  • Home owners – 67 per cent of Australians (37 per cent of households have a mortgage)
  • Social and affordable rental housing – 3 per cent of Australians
  • Homelessness – 0.5 per cent of Australians

The REIA noted the market for first-home buyers was at its peak in June 2009, when 48.2 per cent of all new loans were from this cohort.

With housing support programs and COVID-19 stimulus packages ending, first home buyer activity has declined 20 per cent since the start of 2021.

Reserve Bank of Australia explains how the pace of population growth impacts demand in housing

Population growth from both births and net migration generally contributes to the increase in demand for housing services, according to the Reserve Bank of Australia (RBA).

From the mid 2000s, the Australian population grew strongly, which saw household formation rates increase, raising demand for housing services. This growth reflected increased immigration, including people on student visas.

The RBA noted this led to an increase in demand for rental markets in major cities, especially in neighbourhoods close to universities.

More recently, COVID‐19‐related border closures have led to a sharp fall in population growth, while HomeBuilder and other state‐based schemes have provided incentives for new home construction, boosting the pipeline of supply of dwellings.

There has been rapid housing price growth and strong growth in rents in some areas, which RBA noted as showing there has been at least a modest increase in household formation despite slower population growth.

Increased consumption of housing per household is also likely to have contributed as some households have sought more space. The RBA also found price growth has been just as strong in other comparable economies that have not seen the same decline in population growth.

Currently, the primary two choices for housing is to buy or rent a home.

Australia’s current tax system makes it favourable to own your own residence, as well as owning additional properties as an investment asset.

The RBA noted these policies impact balance of demand and supply in both housing and rental markets, raising housing demand and potentially reducing rental yields.

The RBA has frequently noted Australia’s tax and regulatory settings could benefit from holistic consideration.

It was recommended the government incentivise using more of the existing stock of housing and to improve the mechanisms around constructing new supply, including replacing stamp duty on residential property transfers with land taxes.

However, the RBA also pointed out the full extent to which stamp duty impacts affordability is still unclear.

REA Group discusses stamp duty tax and the expansion of current government schemes

REA Group Head of Industry and Government Affairs Umesh Ratnagobal noted the group’s view that stamp duty was an inefficient tax that acts to slow the property market.

Mr Ratnagobal suggested as payable stamp duty increases over time, it becomes more of an obstacle to households being able to move, believing the added cost of stamp duty on a new purchase is a disincentive.

While some argue states have become dependent on the revenue generated by stamp duty, Mr Ratnagobal noted there was also evidence the removal of stamp duty would result in further price rises over the medium-to-long term, causing a net gain to revenue.

“REA’s position is that stamp duty reform is urgently needed to allow the property market to function more efficiently,” Mr Ratnagobal wrote.

“REA fully supports the NSW Government’s reform process and urges other jurisdictions to look at following suit.”

Mr Ratnagobal also believed the Federal Government First Home Loan Deposit Scheme should be expanded even further.

“This scheme allows first home buyers access to a home loan with as little as a five per cent deposit and has been a significant factor in a boost in first home buyer activity over the last year,” he wrote.

“While the recently announced expansion of places from 10,000 to 30,000 is sensible, expanding the scheme to more first home buyers would have a significant impact on home ownership rates.”

Alternatively, Mr Ratnagobal suggested a different option would be to further investigate the capital treatment of loans by the Australian Prudential Regulatory Authority (APRA), which is what makes high loan-to-value ratio (LVR) loans more expensive and is a significant barrier to entry for first home buyers.

Domain reveals concerns for young Australians

Domain highlighted that Australia’s young adults and low-income workers were hit the hardest by the pandemic.

These two groups were already the least likely to own a home and now home ownership is even further out of reach as the wealth gap widens.

Domain cited Australian Housing and Urban Research Institute research that showed 19 per cent of renters lost all or part of their income during the pandemic.

It also noted the damage was even more significant for young renters, with more than 40 per cent of 18 to 29-year-olds and 30 to 49-year-olds having lost all or some of their income.

It also noted higher income incomes were financially benefitting from the pandemic, as they were able to take advantage of income tax cuts, low interest rates and new bank lending rules.

Of course, the most significant benefit was being able to keep high with skyrocketing house prices, according to Domain Research and Economics’ Dr Nicola Powell.

“Strong conditions in the Australian housing market have resulted in more sellers lifting asking prices midway through a sales campaign,” Dr Powell said.

“As prospective buyers have been making inquiries and attending inspections, many vendors have felt confident they could be commanding greater asking prices.” 

In February 2021 Domain did a special research report looking into ‘rent vs buy’. Findings show that:

  • Paying down a mortgage is now cheaper than renting in 722 suburbs for houses and 180 suburbs for units around Australia.
  • Almost 37 per cent of suburbs have a lower mortgage repayment compared to weekly rent.
  • The more premium a suburb, the greater the mortgage repayment becomes relative to rent.
  • Opting to rent appears to be more cost-effective on a weekly budget in locations that have more expensive median purchase prices.

Domain noted people who were in the property market would have benefitted from mortgage serviceability improving. However, it has an adverse effect on affordability as low mortgage rates and property price growth “go hand-in-hand”.

As house prices have increased, stamp duty has spiked at a greater rate.

Stamp duty burden has increased over the past 15 years (NSW LGA reference). Source: Domain

Raine & Horne on capital gains tax breaks for older investors and stamp duty concerns

Raine & Horne Executive Chairman Angus Raine noted increased real estate values during the pandemic has made it more challenging for older property investors – defined as baby boomers and the silent generation – to sell long-term assets.

Mr Raine suggested this issue was contributing to supply challenges in capital cities, suggesting the government should reassess a policy approach from 2007 to address the current issues.

“One option to breaking this supply impasse is to provide older investors with an exemption for, say, 24 months on the payment of the CGT liability,” Mr Raine said.

“Moreover, this tax deferral could encourage older investors in much the same way the decision by the Howard Government in early 2007 to make transitional changes to superannuation.

“At the time, the Federal Government opened a short window of opportunity for retirees by allowing them to make up to $1 million in after-tax superannuation contributions before July 1, 2007.

“Consequently, property listings in Sydney skyrocketed as older property owners cashed in their housing chips and redirected their retirement savings to superannuation to take advantage of the tax changes.

“Under the Federal Government’s super regulations, money received from a taxed super fund was made tax-free for people over the age of 60, making it the most tax-effective investment for retirement at the time.”

Mr Raine noted the spike in listings allowed tightly held markets to loosen and had a ripple affect to entry-level markets.

“I’m confident 14 years later that a two-year CGT tax deferral could have a similar impact by encouraging older property investors to sell creating a more direct entry point for younger buyers, especially those seeking homes in many inner ring property markets in our capital cities,” Mr Raine said.

Mr Raine also commented on the tax changes which will give property buyers the choice to pay stamp duty, land tax or a small annual property tax.

“I have concerns about how an annual property tax would work and any possible unintended consequences,” Mr Raine said. 

“We need to make sure that we aren’t robbing Paul to pay Peter by introducing an annual tax that will place more financial stress on landlords with multiple investment properties, who are already struggling under the weight of COVID-19 rental laws.”

Mr Raine further shared his opinion that the First Home Owners Grant and related subsidies have contributed surging conditions and hindered housing affordability.

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Jessamy Tredinnick

Jessamy Tredinnick was the news journalist for Elite Agent Magazine from June 2021 - October 2021. For current stories, news alerts or pitches, please email