HIA: stamp duty behind 500,000 less homes, $40k home loan hit
A desperate Aussie home buying tactic is costing owners upwards of $40,000, and it's largely because of their state government.
A new Housing Industry Association report has revealed some of the jaw-dropping hidden costs of stamp duty taxes around the nation, including the added whack for purchasers who opt to borrow the money needed to cover the upfront tax.
The Association's Stamp Duty Watch report released yesterday called for changes to the tax nationwide if Australia is to reach its 1.2 million new homes National Housing Accord target, but especially for states hitting foreign investors with the biggest additional costs.
Australia's worst neighbours exposed
Their figures indicate higher tax bills for foreign property investors had wiped out more than 500,000 new home builds nationwide across the past decade — significantly exacerbating the nation's current housing and rental crisis.
For local homebuyers, HIA senior economist Tom Devitt said their calculations showed the typical homebuyer who borrowed to cover their stamp duty would be paying more than $40,000 in extra stamp duty costs in NSW, Victoria and South Australia.
Stamp duty costs are set independently by state governments.
Over the course of a 30 year loan at a 6.55 per cent average variable rate, Victoria's nation-topping 5.3 per cent stamp duty cost for a $729,000 typical home leads to a $38,810 stamp duty payment. Put that on your mortgage and it would cost you another $48,229, for an eye-watering total north of $81,000.
Nationally, the average added cost would be $38,786 — on top of an initial $31,211 stamp duty for a $785,000 home.
Queensland has the lowest stamp duty cost in the nation at 2.7 per cent, or about $21,220 for a $786,000 typical home. Adding that sum to your mortgage would add about $26,370 to the final mortgage bill over 30 years.
Mr Devitt said that the added money lost from budgets would also lead to 'opportunity costs' — as households lost the option for investing the money instead, or for putting it towards other things such as holidays.
The alternative for many homebuyers is to compromise on home features or location.
While a smaller back yard was unlikely to have significant ramifications, Mr Devitt said a longer commute would not only cost owners more in petrol — but also came with 'environmental costs as people spend more time on freeways'.
Smart Lending managing director Melissa Gielnik said it was generally a bad idea for buyers to borrow stamp duty costs.
Banks will not allow for it without a guarantor over the loan, typically family, or without the buyers reducing their deposit — which would further increase the size of their mortgage.
If a lender did let the buyer do it, there was a significant chance they would be facing lenders mortgage insurance costs they might have otherwise avoided.
While scrapping the much maligned tax wouldn't directly add to the cost of homes, Ms Gielnik said it was likely a way would have to be found to stop vendors becoming greedy and demanding more money from prospective buyers — or prices would rise.
The stamp duty costs for foreign investors have also had significant impacts on the nation's new home supply.
HIA chief economist Tim Reardon estimated that with the number of new multi-unit dwellings effectively being halved for the past decade since state government's began adding additional stamp duty costs for foreign investors in 2015, Australia had missed out on more than 500,000 new homes.
'That would have had a substantial impact … if they had all happened, rental price growth would have been 2-3 per cent a year, rather than the 5-15 per cent that we have seen,' Mr Reardon said.
'We would be seeing rental vacancy rates above 3 per cent.'
The economist added that 'close to 100 per cent' of any additional stamp duty costs paid by international investors developing apartment buildings would be passed on to buyers in heightened costs, or to tenants in higher rents.
'Government's can tax whoever they like, but the impost will be born by the Australian household in the end,' he said.
With the federal government increasing migration for much of the past 10 years, the result had been increasing population amid lower incentives for foreign funds to support new builds — driving up home prices as well.
The alternative was that they took their money elsewhere.
'If Sydney in Australia is going to tax you, upfront, an additional $160,000 compared to other countries, they (investors) will take that capital elsewhere — it's very liquid,' Mr Reardon said.
'And Australia's mum and dad investors don't have the capital to build apartment complexes,' Mr Reardon said.
The economist added that without changes to stamp duty taxes, particularly for international buyers, there was no way for Australia to reach a 1.2 million new homes by 2029 target set as part of the National Housing Accord.
FIRB stats show in the 2014-2015 financial year there were $60.8bn worth of Aussie home sales approved to internationals.
In the 2023-2024 financial year there were just $6.6bn in foreign residential real estate sales in Australia. Latest stats show that in the first three months of the current financial year the figure was just $1.3bn.
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