The National Housing Finance and Investment Corporation (NHFIC) has recently released a report on Stamp Duty Reform.

The report highlights the need for transformation in our current property taxation system as the dynamics of the modern property market have evolved since these systems were established in the 1800s.

Master Builders Victoria continues to advocate for the removal of stamp duty taxes, to help housing affordability. 

The report’s findings support our ongoing advocacy for the building and construction industry and Victorian homeowners and investors.

Decreased mobility

NHFIC estimates that stamp duty in Australia decreases mobility by 11 per cent.

Stamp duty tax places higher costs on households that would like to move residence.

This leads to frictions in the labour market as people are unable to relocate freely for work or other purposes.

The costs of these taxes are intergenerationally inequitable as mobility is more frequent in Victorians aged in their 20s and 30s.

It is one of the major obstacles for first home buyers to enter the property market.

Housing affordability

Stamp duty leads to inefficient use of housing by limiting a household’s ability to upsize or downsize to a more appropriately sized home.

This puts pressures on housing supply.

Stamp duty rates have not considered the pace of rising house prices in Victoria resulting in higher land taxes than necessary.

The Victorian Government has recently introduced a new “premium” transfer duty rate of 6.5 per cent on properties valued over $2m and a new 50 per cent Windfall Gains Tax to be effective from July 2022.

Master Builders is concerned that these additions to taxation will act as a double tax on Victorian homeowners and investors.

These new taxes will be passed on in higher land prices and stamp duties will inhibit people from selling properties to allow new homes to be built – having a direct impact on housing affordability.

Moving towards a broad-based land tax

The report confirms Master Builders Victoria’s concerns that stamp duty taxes risks exacerbating an already stagnating housing market.

Victoria has the largest effective rate of transfer duty in Australia - therefore, we have the most to gain from reform.

The replacement of stamp duty tax with a broad-based land tax would encourage increases in housing mobility by lowering the cost of moving between properties, create greater efficient use of housing stock and encourage vacant dwellings to be used.

Greater accessibility and affordability to existing housing would help reduce pressures on the building and construction industry who we know are being impacted by the effects of COVID-19 and supply and trade shortages.

Moving towards a broad-based land tax will support Master Builders long-term policy goals for greater housing affordability and greater urban densification in Victoria.

The economic activity generated from residential development supports jobs and is key to our economic recovery.

Increasing stamp duty taxes only places a greater burden on our building and construction industry.

Click here to see NHFIC’s Stamp Duty Reform Report.