The high cost of stamp duty in New South Wales is the most significant barrier to homeownership in the state, asserts Leanne Pilkington, managing director of Laing+Simmons, a boutique real estate franchise network.

Even though the NSW government is on track to gain $4 billion in surplus (in large part due to revenues from stamp duty), as announced by the state’s Treasurer in the half yearly budget update, Pilkington has warned that the “revenue party” will not last forever.    

A growing list of residents cannot afford to move, and many find it cheaper to stay put and renovate their homes. This, in turn, is increasing the pressure on property prices and reducing the amount of stock on the market, irrespective of the number of new developments springing up in new neighbourhoods.

“Stamp duty is one of the most significant influences on property price growth in NSW,” Pilkington said. “It contributes to fewer listings, so transactional activity suffers, and the flow-on impacts are felt down the supply chain: household goods suppliers, homewares retailers, white goods manufacturers…the list goes on.”

According to CoreLogic RP Data, the amount of new housing stock being added to the market is consistently lower now, with the shortage of advertised stock being most pronounced in Sydney. Total advertised stock levels are currently 10.2% lower than a year ago, and there are approximately half as many advertised properties on the market compared to the 2011 peak of more than 40,000.

“As well as holding back fresh stock and fuelling unsustainable price growth, stamp duty also jeopardises employment opportunities in the real estate industry as reduced transaction volumes means agents simply aren’t able to employ new people,” Pilkington said.

“Stamp duty is a short-term revenue booster with disastrous long-term consequences that we are already seeing play out, most noticeably in the affordability crisis we are currently faced with.”

Jane Fitzgerald, NSW executive director of the Property Council of Australia, is supportive of Pilkington’s assertion. She said the state’s reliance on stamp duty revenues is creating more challenges for NSW families who’re trying to purchase homes.

“This budget update encapsulates the worst of stamp duty – it keeps house prices high while reducing market mobility in a softening market,” she said. “If [the NSW government] stopped its reliance on stamp duty and instead looked at other ways to raise revenue, then house prices would come down and affordability would improve.

“If you reduced stamp duty by 50 per cent, you would knock over $17,000 off the existing price of a median priced home in Sydney.”
 

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