The NSW Government's expected budget surplus this year could be short lived if stamp duty further constrains the volume of activity on the property market, says Laing+Simmons Managing Director Leanne Pilkington.
Pilkington warns that as more and more people simply can’t afford to move because of exorbitant stamp duty costs, the river of funds flowing into government coffers could dry up.
The cost of stamp duty in NSW is the most significant barrier to purchasing property in the state and is increasing property prices, says Pilkington.
When home owners decide not to move, but to renovate instead, they reduce the amount of stock on the market.
“Stamp duty is one of the most significant influences on property price growth in NSW," said Pilkington.
"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,” she said.
CoreLogic RP Data shows that 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.
CoreLogic RP Data recently reported the median dwelling price in Sydney rose 13.1 per cent in 2016 to $845,000. A property of this value would incur stamp duty of $33,515, and that doesn't include the additional costs of mortgage and transfer fees.
Incurring such a cost simply for the right to participate in the market is unreasonably excessive, said Pilkington.
Pilkington said stamp duty should "shoulder the majority of the blame for the critical housing affordability issue that the people of NSW face", and called on the state government to reform stamp duty if it is serious about helping people, particularly young people, enter the property market.
Pilkington said when the Northern Territory and Western Australia lowered stamp duty, the volumes of property transactions rose, and government revenues actually increased.
“When the Northern Territory and West Australian Governments reduced stamp duty, revenues increased as a direct result because of volume increases," she said.
“Continued inaction and the refusal to implement stamp duty reform may see the reduction in state revenue be much more alarming than currently expected,” warned Pilkington.
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