Supply constraints, stamp duty the major impediments to housing affordability
‘Both demand and supply factors have driven the nation-wide deterioration in housing affordability, both for purchasers and renters. Many of the recommendations made by the Senate Committee are sensible proposals which should be considered in the development of a holistic response to the issue by all three levels of Government.
‘While the REIA welcomes a review of the tax system, the review must take into account the full range of taxation provisions affecting the housing market, including state property taxes. Furthermore, it must take into account the likely impacts on the rental property sector if changes to capital gains tax and negative gearing provisions are proposed. The many renters struggling to find a place to rent at the moment, and particularly affordable rental properties, will not thank the Government for any further disincentives to property investment.
‘The REIA strongly supports the recommendation of the Committee that all state and territory governments should consider stamp duty exemptions for first home buyers and retirees who are downsizing their primary residence. We have long supported an exemption for retirees, as this will assist in freeing up the supply of family homes close to employment opportunities, and will provide an incentive for retirees to consider housing options more suitable for their household size.
‘Stamp duty concessions or exemptions for first home buyers are already in place in some states, but there are other states which persist in seeing first home buyers as a cash cow. With the exception of WA, NT and Queensland, for a median priced home, the States give the First Home Owners Grant with one hand and take it away in stamp duty with the other. The worst offenders are the ACT, where after the First Home Owners Grant is given, then taken away, the first home buyer still has to find another $10,475 to pay stamp duty on the median priced home; and Victoria, where first home buyers who buy an established home still have to find an additional $7,995 to pay stamp duty after the grant and the state first home bonus are given and then taken away.
‘Even when first home buyers purchase a home valued at $300,000, a third less than the Australian median price, some states continue to levy stamp duty which exceeds the value of the First Home Owners Grant. These include Tasmania, ACT when the home buyer does not meet a means test, Victoria when an established home is purchased, and South Australia, albeit only minimally.
‘The recommendation that the First Home Owners Grant should be reduced for buyers of existing dwellings would remove choice from first home buyers, particularly those who want to buy a home in established areas close to employment and other infrastructure. It is not practical or equitable to suggest that first home owners should be concentrated in new housing developments, often distant from schools and employment opportunities.
‘The Committee has recommended an examination of options for a securitised mortgage scheme. It is the REIA’s view that this should be approached with caution: housing finance should remain in the private sector, with stringent prudential arrangements in place to ensure borrowers are equipped to meet their financial commitments. United States experience has shown the weakness of a housing finance system which encourages low-doc loans, and lenders lending to those without sufficient financial resources.
‘The final recommendation of the Committee, regarding the formation of sustainable communities, is welcomed. The role of immigration in meeting skill shortages in the construction sector has been considered by the Committee. Consideration must also be given to the impact of immigration and the rate of formation of new households on demand for housing. With dwelling construction figures released today demonstrating the weakness of growth in new housing stock, the demand-supply imbalance looks set to remain problematic for some time to come, despite the various measures such as First Home Saver Accounts and the National Rental Affordability Scheme being introduced by the Government,’ concludes Noel Dyett.
