OPINION: Stamp out duty to encourage first timers

admin | 杭州桑拿
4 Dec 2018

FEARS the Reserve Bank would at some point use interest rates as a brake on increasing property prices have so far proved unfounded.

On Melbourne Cup day, governor Glenn Stevens said in a statement that: ‘‘on present indications, the most prudent course is likely to be a period of stability in interest rates’’.

Given that statement, it is interesting to see warnings to property buyers from real estate body REINSW not to over-extend themselves.

There is no doubt the property investment market has been very strong, so I suspect the RBA’s steady-as-she-goes attitude has much to do with consumer sentiment and even the lacklustre state of the job market in some areas.

Youth unemployment comes to mind, here.

First-home buyers of the future are struggling on several levels.

Some can’t find a job, others aren’t paid well enough to save their 10per cent deposit quickly enough, and the exorbitant cost of stamp duty just adds to that savings burden.

On a $550,000 property purchase in NSW, the cost of stamp duty comes in at just over $20,000.

Also, the government’s attitude of supporting only those who buy or build new homes with a $15,000 first home owners grant is particularly short-sighted.

And that amount will reduce to $10,000 on January 1, 2016.

The high cost of land in established areas often means buying or building a new home in cheaper outlying areas.

The downside of that can be first home owners spending copious amounts of their regular budget on travel costs, given employment in outlying areas is often scarce.

Previous studies have shown that spending more than an hour in travel to and from work puts particular strain on family groups and is a major contributor to relationship breakdown.

All of these factors point to why potential first home owners could be languishing on the sidelines, rather than rushing in to buy.

Some choose to rent or stay at home longer and some even buy investment properties to take advantage of negative gearing, instead of their first home.

Long-term this is a trend that has significant flaws.

National valuer Heron Todd White in its November Month in Review acknowledged both the fundamentals of the booming Newcastle property market at present – low stock levels and multiple buyers – and the flaws, citing increased pages of rentals available on real estate websites.

‘‘Property managers are reporting more stock available for rental and longer rental periods,’’ it said.

Calls to end negative gearing or introduce controls are seen by some as a way to address the imbalance of the investor-driven market.

But would that be enough to entice potential first home buyers off the fence in higher numbers?

Others argue first home buyer grants only serve to inflate prices.

One thing is certain: removal or reduction of onerous state taxes such as stamp duty would certainly lessen the burden of buying for those just starting out.

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