Australia’s state governments are finally taking note of the housing affordability crisis in our cities.
Buying a house is the largest transaction that most people will make and the sums involved mean that the amount of stamp duty payable can be a problem.
There are always proposed solutions being put forward to provide relief to cash-strapped buyers that cannot afford the financial burden of purchasing a new home.
These are wide and varied and usually questionable.
My idea, as you will see below, keeps it very simple, manageable and achievable.
First of all, there are a number of taxes and levies incurred when you purchase a home.
Stamp Duty – see below for amounts levied against Value of Property
$300,000 >>> $11,330
$400,000 >>> $16,330
$500,000 >>> $21,330
Land Tax – Principal places of residence are generally exempt from land tax.
Emergency Services Levy – $250 on house valued at $400,000
There are also, of course, other government costs to be added to the purchase price, which will raise the buyers costs even more, to approximately…
$300,000 >>> $13,750
$400,000 >>> $19,500
$500,000 >>> $25,500
So, as well as trying to save for a deposit, buyers need an extra $15k – $25k [approx] to pay for government taxes.
They then have their next financial hurdle dealing with the banks.
Is it any wonder that First Home Owners are struggling to buy a home.
The First Home Owner Grant (FHOG) is paid by the State Government to eligible first home owners.
If the market value of their purchase does not exceed $575,000 then a $15,000 FHOG is potentially available, but only for those that build or buy a new residential property. It’s a nice gesture and does offset some of the money the government claws back in taxes, but it needs an overhaul.
And this is the [IMHO] best solution.
Levy the SELLER of any property sold for the Stamp Duty.
As most sellers are looking to upgrade, the Stamp Duty impost will be negated by the savings made in not having to pay any Stamp Duty on their new purchase.
The sellers who are exiting the home owner market will obviously add this cost to their asking price and should be able recoup it that way.
For example –
Seller wishes to sell their house for $500k
Seller adds cost of stamp duty to price = $521,330, which they will round up to $525k to give themselves some bargaining power – if required. This will be approximately 5% of asking price.
I also propose that the SA Government keep The First Home Owner Grant (FHOG), but amend the amount to $10,000. This will help The First Home Owner with all the other ancillary costs of buying a home, and smooth their road to home ownership.
The government would see an increase in Stamp Duty revenue due to the rise in house prices.
This would then allow them to bury the ridiculous fantasy of re-introducing a Land Tax.
This new scheme would obviously have benefits beyond helping First Home buyers.
There would be an increase in the number of dwellings being built, furniture and white goods sales, and more jobs – especially in construction.
The hard tasks of the The First Home Owner are not only trying to save the $15,000+ for government taxes, and the additional $5000+ in closing costs, but also having to save for the required deposit.
By taking away the burden of Stamp Duty from the buyer and allowing them to use that money as a deposit, it will bring a breathe of fresh air to the state.
And a light at the end of the tunnel for home buyers!
Thank you linesmen, thank you ball boys!