Housing affordability improved over the past 18 months as home prices fell, interest rates were cut and wages continued creeping upwards, making it easier to enter the housing market. These conditions have made housing the most affordable it has been in 20 years, but this is just a temporary reprieve – not a ‘get-out-of-jail-free’ card.
New homes are one of the most heavily taxed commodities in the economy behind the ‘vice taxes’ of alcohol, tobacco and gambling. Yet housing is a true necessity of life. We don’t impose the GST on food because it is a necessity.
Not only are houses one of the most heavily taxed items in the country, taxes on housing raise more revenue than any other particular form of activity or industry. The housing sector contributes 10 per cent of the total revenue collected by all tiers of government. Stamp duty on property also comprises around one in every five dollars raised by state governments.
New homes are also responsible for raising 14 per cent of all GST revenues and if current trends continue, in only a few years, more revenue will be raised from taxes on housing than the GST.
Each new impost adds to the cost of housing, making it harder for the 92 per cent of renters in Australia that aspire to home ownership to achieve their goal. It’s not surprising then than only 49 per cent of renters believe they ever will own their own home.
However, taxes are only part of the problem. Red tape also adds to the cost of home building which in turn adds to the time taken to build a new home. Every delay entails an additional cost on which more stamp duty and GST are applied.
When combined, the taxes and red tape burden applied to the construction of a new house and land package in Sydney can account for 50 per cent of the cost paid by the homeowner. That is, only half of the cost of a house and land package is the house and the land, the other half is all of the other costs imposed by three tiers of government.