Only removing archaic government duties and taxes would improve housing affordability: Terry Ryder
Take-up of the NSW government’s grants for first-time buyers building new homes, which started in October, has been extremely low.
In the December 1uarter, the first three months since the grant started, only 378 grants were paid across the state.
It highlights yet again how governments miss the mark in their attempts to boost home building.
The NSW grant is $15,000 for first-home buyers who build or buy new homes. It sounds generous but it’s small change compared with the price differential between new homes and existing ones.
Across Australia, the average difference is around $70,000. In some parts of Sydney, it’s well over $100,000. That’s why 85% of first-home buyers opt to existing homes in preference to new ones.
State and federal governments that offer grants to first-home buyers are not being fair dinkum. They’re trying to make a show of doing something to help, while avoiding the real issues.
If politicians genuinely cared about the affordability of new homes, they would address the core issue. That is the component of the cost of a new house on land that is attributable to government taxes and charges.
Research indicates that as much as 40% of the price of a new house-and-land package is government imposts.
That means that if you eliminated those taxes and charges, a package that currently costs $400,000 could be reduced to $240,000. A $300,000 package would drop to $180,000.
That would really make a difference.
It’ll never happen, of course. Governments are addicted to the revenue they milk from the real estate industry through archaic imposts like stamp duty and land tax. Local authorities add to housing costs with their (sometimes massive) charges on developers of housing estates.
Tossing a $15,000 bone at a young first-time buyer allows the pretence of caring and doing something, while raking in considerably more in taxes and charges when the buyer builds a new home. It’s an extreme example of giving with one hand and taking with the other, because what they take is more than they give.
It’s politics at its cynical worst.
It explains why the only major real estate indicator that is not rising steadily is the rate of new home construction. Buyers continue to opt for established homes because they’re considerably cheaper and the grants on offer do little to bridge the price gap.
It will probably always be thus.
Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.
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