VIC stamp duty changes: What the developers and experts are saying
It was announced over the weekend that the Victorian Government will seek to increase stamp duty and land tax from July 1.
Stamp duty will rise from 5.5 per cent to 6.5 per cent for those purchasing any property over $2 million and a land tax increase from 2.25 per cent to 2.55 per cent for properties valued over $3 million.
There will be a larger increase in land tax on properties valued between $1.8 million and $3 million. There will be a 19 per cent from the current 1.3 per cent, up to 1.55 per cent.
Urban.com.au CEO Mike Bird says the proposal will have the greatest effect on downsizers and younger families.
"The policy feels inconsistent with the recent federal government budget focusing on encouraging older generations to down size from the family home into something more suitable (down sizers are now able to contribute to $300k from their home sale into their superannuation at a more favourable tax rate), freeing up that housing stock for younger growing families," Mr Bird said.
"We want to see barriers removed to enable home owners to "rightsize" into something that makes sense for their living requirements and this policy isn't helping achieve that."
One of Melbourne's most recognised developer, Tim GURNER, says it is not the time to kill one part of the economy that is providing strength and jobs for Australia.
"These draconian style tax regimes need much deeper and thorough conversation and thought!!" GURNER says.
GURNER says the introduction can only lead to a big jump in house prices, as everyone just adds the additional cost to prices and supply drops, which will in turn make it harder for families to enter the home market with stamp duty hike.
GURNER adds that it will also de-incentivise developers to be active which reduces supply and will increase cost of living and homes. He says that all of these factor will lead to huge job losses when they filter through.
Illan Samuel, head of Samuel Property who specialise in luxury projects, says the proposed stamp duty increase will only lead to the additional cost being passed onto buyers, again putting pressure on affordability of property in Victoria.
"Developers work to commercial returns," Samuel says.
"If the cost of doing business increases, this will be passed onto the consumer - like any other business.
"However, if the consumer will not absorb the cost - then no transaction will occur, and ultimately the economy suffers."
Samuel says, in his opinion, that this is the complete opposite of what the Labour government should be proposing.
"A property lead recovery out of Covid-19 market conditions, which saw Melbourne hit the hardest with long and harsh lockdowns impacting on the ability to transact is vital.
"Increasing stamp duty after initial market runs will only stimy activity and create negative association to property, particularly off the plan (high density) property which, unlike the house and land sector did not benefit from the Home Builder stimulus. I
"I would expect fewer transactions, leading to less stamp duty collected by the government - whereas a reduction in stamp duty would have lead to more transactions, and likely more stamp duty collected in dollar terms. It is a short-sighted move."
Kris Daff, the managing director at Assemble, who are pioneering affordable housing across Melbourne, says 2021 is a time when Government should be generating tailwinds for the real estate and construction sectors, sectors who are significant employers and generators of economic recovery and growth.
"The introduction of foreign buyer surcharges is an example of the unintended consequences of ill-considered policy, which has contributed to new apartment sales falling off a cliff and commercial builders in the state facing huge reductions in work in hand as a result."
What the experts are saying
REIV president Leah Canlan
"The tax hikes will make Victoria a less desirable place to invest, ultimately harming jobs and the economy.
“The government continues to burden Victorians with increases to property taxes. Property already accounts for more than 40 per cent of government revenue. There is not much more capacity any one sector to absorb further tax burden.
“If the Victorian Government is serious about jobs and housing it needs to invest in real estate, not attack it."
AMP Capital chief economist Shane Oliver
"While I can understand the desire to reduce the deficit, stamp duty is a bad tax that distorts economic decision making and should really be phased out in favour of land tax as NSW is considering.
"So relying even more on it runs counter to this and will further distort economic decision making in Victoria as well as make housing even less affordable."
Victorian Executive Director of the Property Council Danni Hunter
"This is a sucker punch to the industry that is building Victoria’s recovery. One in four Victorians work in property and the Victorian Government is raising taxes at a time when it should be creating jobs.
“This is a tax hike on the home ownership dreams of Victorians. We are heading toward a housing affordability crisis and the Victorian Government has fast tracked our way there by slugging homebuyers and businesses in this short-sighted move.
“The Government knows the price for these tax changes will be paid by every single Victorian."
Hotspotting founder Terry Ryder
"The decision by the Victorian Government to hike land tax and stamp duty on investor owners continues the age-old problem of politicians using the housing industry as a cash cow - and thereby making housing affordability worse.
"The problem of affordability can be summarised like this: it's caused by politicians at all three levels of government milking the housing industry for revenue. Local government does it and the Federal Government does it, but by far the worst are state governments. Every time a state government needs some extra revenue, they slug developers and investors.
"They believe there's little electoral damage in doing that, but ultimately it's the home-buyers who pay, including first-home buyers. Developers can't sell a house and land package for $400,000 if it costs $500,000 to create - and a huge proportion of the cost is taxes, fees and charges from the three levels of government, but especially state governments.
"Right now, Australia has a rental shortage crisis and politicians should be encouraging investors to buy properties and make them available for rental. Our politicians, however, continue to discourage investors - hence the ultra low vacancies and rising rentals in most locations across Australia. With this move by the State Government in Victoria, the situation just got worse."