State governments are facing growing calls from the real estate industry to slash stamp duty costs as the property market straps in for its worst auction season yet.
Auction clearances sunk to 32-year lows over the weekend, with over 45 per cent of homes withdrawn due to lockdown measures and social gathering restrictions, while the impact on property sales in the coming quarter is shrouded in uncertainty.
“The housing market won’t be immune to a drop in sentiment and weaker economy, however the extent of the impact on dwelling values remains highly uncertain,” CoreLogic head of research, Tim Lawless said.
But slashing stamp duty could be the missing ingredient to keep the property market afloat, Real Estate Institute of NSW president Leanne Pilkington told Yahoo Finance.
“Stamp duty has been a barrier to buying and selling property for a really long time,” Pilkington said. “For every $1 million, you have to pay about $40,000 in stamp duty. In Sydney, that’s a significant amount of money.”
Pilkington said as a result, many buyers choose to renovate their own homes instead, or downsizers choose to stay in family homes rather than pay stamp duty on a new one.
And now, given the uncertainty caused by the coronavirus pandemic, Pilkington said buyers are adopting a ‘wait and see’ attitude, which could spell bad news for the property market.
“That will have a really bad impact on sales, which in turn will negatively impact the state governments’ revenue,” she said.
Slash stamp duty, Pilkington said.
“If the state government came out and gave us a massive reduction on stamp duty for just a period of time, it’s going to stimulate some buyer demand,” she said.
“People are going to think, ‘well I’d better buy sooner rather than later’.”
Reducing stamp duty will also serve a dual purpose, keeping many Aussies in jobs.
“Buying and selling property doesn’t just keep real estate agents in jobs,” Pilkington said.
“It keeps mortgage brokers in jobs, conveyancers, removalists, stylists and photographers in business.
“There’s a massive amount of business that hangs off a real estate transaction.”
Is it likely to happen?
While REA Group chief economist, Nerida Conisbee, agrees stamp duty is a “big problem”, she doesn’t think state governments will be slashing it any time soon.
“Right now, I think it is highly unlikely state governments would be looking at this even slightly given what is going on,” Consibee told Yahoo Finance.
“They will however see a big drop in revenue from stamp duty this year so it may be something that more will consider once this is over.”
Or, state governments could be looking to switch up the system entirely, according to the economist.
“State Governments are very dependent on stamp duty for revenue,” she said.
“However, it would be preferable to move to a land tax system but it’s difficult to do this. Canberra is currently in the process but it will take a long time. It would create more stable revenue for governments but the time taken to switch is problematic.”
And switching to a land tax system could irk some owners, Conisbee said.
“Owners who have already paid stamp duty feel like Governments are double dipping if they switch to a land tax system.”
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