Property developers are calling for significant stamp duty relief for first-home buyers as well as cuts to land tax, while other industry heavyweights push for concessions in areas such as payroll tax.
The property industry is in no doubt that state treasurer, Eric Ripper, will offer tax concessions come the May budget, but they are sceptical about whether the government will do enough to make housing more affordable for first-home buyers.
Many leading property developers are calling for the state government to not only raise the level at which stamp duty on conveyances is applied for first-home buyers, but to also index the threshold to the median house price.
Indexing the threshold would then mean that, as the price of housing rises, so too does the level at which first-time buyers are forced to pay stamp duty.
Many developers contacted by WA Business News also want the state government to contribute to the federal government’s first homebuyers’ grant and to cut land tax.
But their calls for property tax relief are competing with strong lobbying from other industry groups, which also want tax cuts this May.
Among these groups is the Chamber of Commerce and Industry WA, which has been pushing for significant relief from payroll tax. The government is expected to rake in $1.6 billion from payroll tax this financial year, a gain of almost 82 per cent since 2001-02.
This week, the CCI called for the government to cut payroll tax from 5.5 per cent to 5 per cent.
But the CCI is also seeking property tax relief, lodging a pre-budget submission to the government which included seeking an overhaul of conveyance duty, indexing tax thresholds to stop ‘bracket creep’, calculating stamp duty on GST-exclusive prices and simplifying land tax.
Mr Ripper confirmed last month that the government was planning to introduce tax relief for first-home buyers but would also look to provide relief for renters and other low income earners.
Developers and builders spoken to by WA Business News this week criticised Mr Ripper for recently hinting that property tax reform was on the way without committing to tax relief until he hands down the budget in May.
“What the government is doing at the moment is just ludicrous and beyond belief,” developer and builder Dale Alcock said.
“They are jerking the market around, particularly for first-home buyers looking to buy their first home. You can’t talk about it, you either do it or you don’t.”
The Loans Café managing director, Anne-Marie Syme, said her business was already suffering the effects of Mr Ripper’s speculation on potential stamp duty relief.
“Our figures are down 20 per cent in the past month from where we have been in the last two years,” she said.
“It’s not the house prices. We do a lot of work in the mortgage belt and the government saying they are considering raising the bar on stamp duty has slowed the market.”
Mr Alcock said he wanted Mr Ripper to raise and index the stamp duty threshold to the median price of land and the median price of established homes, but expected he would adopt a more conservative approach.
“A mechanism that fixes it forever, like indexing the duty, is probably something that makes too much common sense and is too practical for the government because it denies them the opportunity of coming in and being a hero at another point,” Mr Alcock said.
“If you go back to 2005, first-home owners represented 18 per cent of the new homes market; 12 months later that had dried up to about 13 per cent and we are now running the risk of first-home owners in new homes activity being sub 10 per cent.
“It is unbelievable that could happen without [the government] pulling a lever.”
Stamp duty revenue has increased by nearly 200 per cent in the past six years and is expected to add close to $2 billion to the state coffers this financial year.
The large gains are largely the result of Perth’s booming housing market, with prices more than doubling in the past four years. But the government also increased its return between July 1 2002 and October 28 2004, thanks to increased stamp duty rates.
In June 2002, one month before stamp duty was increased by the Labor government, a house costing $300,000 would have attracted stamp duty of $9,955. In June 2004, a $300,000 house attracted stamp duty of $12,605.
The rates were dropped in October 2004 so that stamp duty paid on a $300,000 house was $10,700.
However, the increase in the median house price from $189,000 in June 2002 to an estimated $460,000 currently means that most home buyers are actually paying more stamp duty, despite the rate cut.
First-home buyers are currently exempt from paying stamp duty for the first $250,000 of an established property and pay a concessional rate for the next $100,000 before attracting the full rate. First-home buyers purchasing land are exempt for the first $150,000 and attract a concessional rate for the next $50,000.
Nigel Satterley of the Satterley Property Group wants the government to lift the stamp duty exemptions for first-home buyers beyond the current median house price and up to $500,000.
According to the interim report compiled by the State Tax Review committee, increasing the first homebuyer threshold to $500,000 will shave $58 million from the government’s anticipated $1.8 billion in stamp duty collections.
Peet Ltd managing director Warwick Hemsley said the government should also consider stamp duty relief for the broader community.
“Stamp duty relief for those without a home needs to be considered, rather than solely for first-home buyers, potentially relieving some of the stress on the Perth rental market,” he said.
Mr Hemsley said the treasurer had to address bracket creep.
“The treasurer needs to become proactive in the support of the first home owner and lead this relief to ensure that the Australian dream [of owning property] is still a reality,” he said.
“Perth has become the first city in Australia to have a higher median house price than Sydney.
“The New South Wales government assists first-home buyers in this market by offering exemption on transfer duty and mortgage duty for homes valued up to $500,000, even though Sydney’s median price is around $440,000.”
Australand general manager Chris Lewis said the government should make first-home buyers exempt from paying stamp duty.
“We need to activate activity at the entry level for the rest of the market to keep going,” Mr Lewis said.
“One way to do that is to lower the entry costs like stamp duty. I think it has to be scrapped for first home buyers.
“Perhaps there could be another cap but it has to be at least to the median house price.”
