Stamp duty a hindrance to market sales
Government charges are dissuading property owners from selling their homes, driving up demand and impacting affordability, a survey by LJ Hooker has shown.
The survey of 2,700 home owners showed 44% of respondents who wanted to sell in 2016 but decided against it, cited transactional imposts such as the stamp duty they would pay on their next property as the reason for staying put.
If stamp duty was lessened, 51% of respondents said they would likely go to market, but that figure increased to 61% of respondents if the charge was scrapped entirely.
As the Commonwealth and state governments prepare to tackle affordability in their 2017-18 Budgets, pent-up demand has been a significant contributor to price rises in capital cities.
Nationwide, listings were 8.9% fewer in 2016 than the previous 12 months according to CoreLogic RP Data. The reduced level of choice – accompanied by a record low cash rate - resulted in the number of transactions dropping by 9.2% over 2016.
LJ Hooker’s Head of Research Mathew Tiller said the survey found 60% of survey respondents who requested a market update in 2016 decided against selling.
“A market update is the first critical step in the selling process,” said Mr Tiller. “The fact that six out of every ten people who had a market update decided against listing suggests there is a deterrent in the selling process.
“When pressed for the reason why they chose not to sell, almost half (44%) indicated the costs involved with selling then buying a new home, including stamp duty, were too high.
“As stamp duty is pegged by the state governments to property prices, we’ve seen transactional costs rise exponentially. In Sydney, the sale of a median priced property costs a buyer around $40,000; in Melbourne, the 5.3% duty adds $37,520 for buyers.
“While Sydney and Melbourne sellers have enjoyed strong price growth, respondents have reported the accompanying increase in stamp duty, on the purchase of their next home, as a reason to not sell.”
Mr Tiller said the high response rate to “cost of change” such as stamp duty could give governments ‘food for thought’ during their budget preparations.
“A drop off in the number of transactions has a bearing on the amount of stamp duties collected by governments and place strains on their programs.”
LJ Hooker Network Chief Graeme Hyde said while the efforts of governments to increase new supply assisted in improving market affordability, established homes overwhelmingly accounted for the bulk of real estate transactions.
“Home owners are staying in their properties for longer periods of time which is reducing the necessary turnover of stock. With an increasing and ageing population, it’s important all market demographics have the confidence to buy and sell in the marketplace to aid sustainability,” said Mr Hyde.