Research from Gateway Bank has revealed that more than six in 10 – or 63 per cent – of first home buyers (FHB) said that they could enter the property market earlier if stamp duty was abolished, reducing the time frame by an average of 20 months.
Almost one in four said that it would reduce their home ownership time frame by three years.
The survey findings have come amid the NSW government’s announcement that it is launching a public consultation on enabling home buyers to opt out of stamp duty, and instead choose a smaller annual property tax.
The announcement, which formed a part of the NSW budget 2020-21, stated that the government would gauge the community’s stance on tax reform to reduce the upfront costs for buyers and remove “one of the biggest financial barriers to home ownership”.
The research, which was completed prior to the NSW government’s state budget announcement, is based on a survey of 700 Australians who intend to buy their first property in the next four years.
When asked about what the biggest hurdles were to buying a property, 32 per cent of FHBs said stamp duty and other fees were too high, ranking this as one of the top three barriers.
The survey found that 18 per cent of FHBs said that the reform could reduce their home ownership time frame by six months, while 31 per cent said it could reduce it by a year, and 27 per cent said the reform could fast-track their time frame by two years.
Gateway Bank CEO Lexi Airey said stamp duty amounted to a significant cost for property buyers and could delay FHBs from entering the market by years.
“While the NSW government is proposing to replace stamp duty with a property tax, many first home buyers would be encouraged by any measure providing full or part relief from this upfront, one-off cost,” Ms Airey said.
“The proposed move to a new system stands to significantly fast-track the time to home ownership for first home buyers, and when combined with current government schemes, provides a range of support measures for those looking to get their foot on the property ladder.
“This will be particularly welcome news for many Australians who have had to utilise their deposit savings during the COVID-19 pandemic.”
Mixed reactions to government proposal
The reception from the real estate industry to the proposed reform of the stamp duty system announced by the NSW government has been mixed.
While the Real Estate Institute of New South Wales (REINSW) supported the acknowledgement by the state government that reform of property tax was necessary, CEO Tim McKibbin noted that it would not support the replacement of one property tax with a different property tax.
“While there is no such thing as a good tax, some are better than others,” Mr McKibbin stated.
“When tax becomes a consideration of a transaction and not a consequence, it’s a very bad tax.”
The Real Estate Institute of Australia (REIA) echoed this view, stating that it, and all of its members “have been calling on stamp duty reform for years”.
However, commenting on the NSW government’s proposal, REIA president Adrian Kelly said: “While reforms in the NSW budget may prove to be a promising start, replacing one tax with another does not solve the long-term problem Australia’s property market is facing.”
The University of Sydney’s political economist and Sydney Policy Lab economist-in-resident, Dr Gareth Bryant, believes a move to a land tax “is generally a fairer and more reliable revenue source for state governments than stamp duty”.
He also recognised that making the change optional for new house purchases “is intended to deal with the difficult politics of land tax on family houses”.
However, he warned that the government “needs to ensure that the reform is designed in a way that is progressive, doesn’t further inflate house prices, and avoids unintended consequences”.
[Related: Pandemic drains FHB deposit savings]