Talk of a downturn in Western Australia's residential property sector has strengthened, with both the Master Builders Association and Real Estate Institute of Western Australia flagging it as a problem.
Talk of a downturn in Western Australia's residential property sector has strengthened, with both the Master Builders Association and Real Estate Institute of Western Australia flagging it as a problem.
Master Builders Association of Western Australia director Michael McLean said he had no doubt the market for construction of new homes had gone soft, particularly for first home buyers.
Builders had reported low levels of traffic through display home centres over the past four months, with Mr McLean saying he expected a 15 per cent downturn in residential construction.
However, he assured WA Business News that the industry remained at a very healthy level, with an expected rise in the strength of building in the commercial sector, dependant on the industry's ability to meet demand for labour.
REIWA President Rob Druitt called on the government to honour its commitment to review stamp duty rates once the property market had slowed.
"All indicators are now showing that first homebuyer activity has substantially declined, which is not surprising given that the government taxes them for homes valued at over $250,000 which is an unrealistic benchmark in Perth's new housing market," Mr Druitt said.
"The benefits of lowering the stamp duty rates in 2004 and the introduction of the exemption for first home buyers have been completely eroded by house price increases over the last two years."
Mr Druitt also expressed concern that the Mid-Year budget review contemplates a 25 per cent increase in land tax receipts for 2006-07, indicating threshold adjustments made earlier this year had not been sufficient to adjust for valuation increases.
"This enormous increase in land tax revenues translates into the reality for many investors of a land tax bill they have not budgeted for. This is a negative outcome for the rental sector because investors should be encouraged to hold their properties rather than being financially penalised for doing so," Mr Druitt said.
The full text of an announcemen from REIWA is pasted below
President of the Real Estate Institute of Western Australia Rob Druitt and REIWA CEO Anne Arnold met this week with Treasurer Eric Ripper to advocate tax relief for the property sector.
Issues on the table included land tax and stamp duty.
In its submission to Treasurer Ripper, REIWA argued that substantial relief measures are long overdue and that the increasing tax burden on property owners was hurting both homebuyers and renters.
Rob Druitt expressed his concern that the Mid-Year budget Review, released on Thursday, contemplates a 25 per cent increase in land tax receipts for 2006-07, indicating that threshold adjustments made in the budget earlier this year have not been sufficient to adjust for the increase in valuations.
"This enormous increase in land tax revenues translates into the reality for many investors of a land tax bill they have not budgeted for. This is a negative outcome for the rental sector because investors should be encouraged to hold their properties rather than being financially penalized for doing so," Mr Druitt said.
Mr Druitt said investors, particularly at the lower end of the market, were needed to help meet the strong demand of a very tight rental market and to provide affordable homes for tenants.
"If the Government keeps heavily taxing investors the inevitable result will be that some will leave the market and those remaining will be forced to pass on the increased costs of ownership to their tenants by pushing up rents," Mr Druitt said.
Mr Druitt said the State Government should aim to hold land tax revenue increases to CPI increases by using the rate in the dollar to adjust for valuation increases.
Stamp duty increases are also of concern to REIWA, particularly for first home buyers. Mr Druitt pointed out that while the median house price had risen 156 per cent over the past five years, the stamp duty payable on the purchase of a media priced house had increased by 280 per cent.
"Stamp duty thresholds have not been adjusted since 1982, during which time property prices have increased by more than 700 per cent. The result is that around 80 per cent of purchasers were in the top two tax brackets in the September quarter," Mr Druitt said.
The Interim Report of the State Tax Review found that revenues raised from stamp duty had increased from $550m in 2000-01, to $2b in 2005-06.
"The benefits of lowering the stamp duty rates in 2004 and the introduction of the exemption for first home buyers have been completely eroded by house price increases over the last two years.
"All indicators are now showing that first homebuyer activity has substantially declined, which is not surprising given that the government taxes them for homes valued at over $250,000 which is an unrealistic benchmark in Perth's new housing market," Mr Druitt said.
REIWA is calling on the government to honour its commitment to review stamp duty rates once the property market had slowed.
"The market has clearly slowed and now is time to relax these taxes," Mr Druitt said.
