New research reveals impact of stamp duty increase

Joint research by property analytics organisation PropTrack and research institute e61 has found that stamp duty has risen exponentially in the last generation and is stunting home buyers from entering into home loans.

A typical stamp duty payment costs around five months of take-home income (or six months for those in Sydney and Melbourne) – double the amount it was in the 2000s, according to the research.

While the researchers found that there was “no specific policy change to blame”, the rising costs were a reflection of house prices “outpacing income” as well as “stamp duty bracket creep”.

The report highlighted that stamp duty has risen to an average of $45,000 for a median Sydney home, which is 5.4 times higher, relative to wages, than it was in the 1980s. The rise in cost is equivalent to six months’ pay for an average full-time worker (post-tax).

Similar trends have been noticed across the nation. Melbourne has had a 6.1-fold rise in stamp duty (relative to income) with home buyers required to save on average $42,500. While other states have had a less significant increase in stamp duty costs, Adelaide and Perth have still seen a 4.4 and 4.5-fold rise (respectively) from the ‘80s.

Rising stamp duty costs have not only impacted the back pocket, but are also changing the way that Australians plan and live.

For example, the report noted that home owners who wish to sell their current home and downsize to a more appropriately sized residency are stalled by the cost of stamp duty, while more than one in five 30–40-year-olds said they delay having children due to the cost burden.

The report stated that deterrents to moving homes, such as stamp duty, have direct and indirect impacts on wellbeing. The report explained that those who are prevented from moving might be sacrificing living closer to “family, work, schools or other amenities.”

“According to a McKinnon poll, housing costs – of which stamp duty is an important part – have caused one-quarter of Australians under 40 to delay changing jobs, caused one-in-five in their 30s to push back having children, and prevented people of all ages from moving home,” PropTrack noted in its market insight update.

Indeed, Proptrack and e61’s report showed that abolishing stamp duty is the highest priority for Australians when asked to rank their main priorities regarding housing policies. More than a third of respondents selected abolishing stamp duty in their top five, while the next most popular responses (such as reducing land tax) were at least 5 per cent lower.

“Stamp duty is very costly. Home buyers in Sydney and Melbourne must spend half a year’s worth of full-time income, a burden that has increased enormously compared to a generation ago,” Angus Moore, PropTrack’s senior economist, stated.

“Stamp duty is an inefficient tax because it discourages people from moving to homes that suit them.”

Dr Nick Garvin, research manager at e61, added that housing affordability and availability are “without a doubt, a challenge of our time”.

“Governments and policymakers must consider the unpopularity of stamp duty, and the indirect impacts stamp duty has on various other parts of the economy and people’s lives,” he said.

“Our research also highlights the indirect impacts of stamp duty on other parts of people’s lives including whether or not they change jobs, and when they decide to have children.

“Overhauling the current stamp duty system has the potential to alleviate these pressures on individuals and the economy more broadly.”

How stamp duty has been changing across Australia

Several state governments have been tweaking their stamp duty policies in recent months.

Last year, South Australia removed stamp duty for first home buyers (FHBs) who purchase a new home valued up to $650,000 (or vacant land up to $400,000 to build a new home), while Victoria recently abolished stamp duty on commercial and industrial properties, stating that it was creating barriers for businesses wanting to invest and expand, according to Treasurer Tim Pallas.

The ACT government announced last year it also committed to introducing a new stamp duty exemption for dual occupancy homes on suburban residential blocks to progress housing choice, access, and affordability across the territory. This applies to the first transfer of unit-titled dwellings on suburban residential blocks (RZ1) for purchases up to $800,000 from 27 November 2023 to 30 June 2026.

Over in Western Australia, eligible property buyers can now claim a stamp duty reduction on apartments that are under construction. Buyers of apartments under construction who sign an eligible contract will receive a transfer duty concession of up to 75 per cent of the concession currently available for off-the-plan purchases, capped at $50,000.

However, NSW’s move to give home buyers the option of paying stamp duty or an annual tax was short-lived, after it was repealed less than a year after coming into effect. The Perrottet government had brought in the option, but this was scrapped by the Minns government once it came into power in favour of the First Home Buyers Assistance Scheme that provides a stamp duty exemption for property purchases in the $650,000–$800,000 range.

The Queensland opposition has also recently pledged to raise the stamp duty threshold (should it win power in the next election) to better reflect current house prices.

[Related: Victoria government dumps commercial stamp duty]