- The program allows first-time home buyers to choose between an initial stamp duty or opt for an annual ownership fee
- It is calculated at 0.3% of the value of the land, with an annual fee of $400
- REINSW’s Tim McKibbin says tax is ‘at odds’ with idea of housing affordability
With the NSW State Government having introduced a new Property Tax Bill in Parliament last, Real Estate Institute of New South Wales (REINSW).
The tax, called the First Home Buyer Choice program, will be a trial run and will allow first-time home buyers to trade stamp duty for an ongoing property tax.
It will be set at an annual fee of $400 plus 0.3% of the value of the land. The price cap is $1.5 million, covering about 84% of homes sold in the state according to the state government.
“Homeownership is the investment that starts paying dividends the moment you first walk through your front door and we don’t want people to have to wait a few more years to reap those benefits,” said NSW Premier Dominic Perrottet. .
“Choice is at the heart of these groundbreaking reforms that will put the keys in the hands of new homeowners much sooner and allow young people to capitalize on the financial security that home ownership provides.”
Dominic Perrottet., Premier of NSW
“Cashflow analysis indicates that half of all homeowners sell their homes within 10.5 years, with first-time buyers likely to sell even sooner. This means that for the majority of first-time home buyers who are not yet receiving stamp duty assistance, First Home Buyer Choice will not only allow them to enter the housing market sooner, but pay less overall,” added Treasurer Matt Kean.
Program “at odds” with housing affordability
REINSW CEO Tim McKibbin lamented the idea of introducing yet another property tax in direct contradiction to the state government’s goal of improving housing affordability for first-time buyers home.
“To make something more affordable, the government should tax it less, not replace one bad tax with another. About 40% of the cost a consumer pays for a new property is taxes and charges. Reducing the tax burden and addressing the lack of supply is the best place to start the discussion on improving affordability,” McKibbin said.
“Until real measures are introduced to address the housing shortage, prices will remain out of reach for many aspiring first-time home buyers.
“Excessive taxation not only inhibits buyers, but also supply, and today’s market is the result of decades of inertia in property tax reform.
Tim McKibbin, CEO of REINSW
Mr McKibbin noted that tax brackets for stamp duty have not changed since 1986 – even before most first-time home buyers were born – and have not been adjusted for the CPI during this period.
“This means that more and more properties are subject to higher rates. The NSW Government collected over $14.5 billion in stamp duty for the financial year ending June 30, 2022,” he added.
What are the alternatives to stamp duty for home buyers?
Mr. McKibbin fundamentally believes that tax should be a consequence of a transaction, not a consideration. This means that stamp duty is a significant imposition and therefore a serious consideration for people considering a real estate transaction.
“The irony in the stamp duty debate is that there is empirical evidence to show that by lowering the tax rate, more transactions will be made and the government will actually receive more tax revenue,” he said. said Mr. McKibbin.
In terms of solutions, Mr McKibbin said the institute had presented a range of solutions to help first-time home buyers, such as stamp duty exemptions to better compete with other buyers and relief from stamp for empty nests, to encourage downsizing and freeing up larger homes for families.
In addition to tax reform, McKibbin reiterated the need for a much improved AD process and clear development guidelines at the local level to improve supply, which would ultimately strengthen affordable housing.
“But swapping one bad tax for another doesn’t solve anything, especially for first-time buyers,” he concludes.