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Buying or selling? Get the right advice

Average first home hits $400,000, half of it in tax

By johnboy - 12 October 2011 22

The Liberals’ Zed Seselja is hooting and hollering over new data he’s obtained showing the average first house now costs more than $400,000, with the median at $395,000.

“The average first home now costs more than $400,000, with the median price up to $395,000” Mr Seselja said.

“We also know the average home has around $190,000 in tax alone.

“These numbers are further evidence that first home buyers are suffering under the ACT Labor Government.

“First home buyers are being locked out of the housing market under ACT Labor due to restricted land supply, a broken planning system, poor infrastructure delivery, high taxes and a lack of competition.

“The Canberra Liberals believe the solutions to these problems should include a genuine land bank, which would have a pool of land ready to release, infrastructure improvements, taxation reform, streamlining the planning system and improving competition in the market.

“Since ACT Labor came to power, property rates and charges have increased by over 75 percent and rents have increased by 68 percent.

“Coupled with huge electricity and water bills, Canberrans are hurting financially more than ever before, and are finding it harder and harder to enter the housing market as a result.

What’s Your opinion?


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22 Responses to
Average first home hits $400,000, half of it in tax
intaba 12:02 pm 12 Oct 11

creative_canberran said :

The report is by the Centre for International Economics so will have to look at that for more detail.

Commissioned by the Housing Industry Association, to give them something to present at the tax forum, which seemed to be a lot of self-interest groups telling the govt why their sepcial interest should get tax breaks.

Classified 11:58 am 12 Oct 11

If we want improved affordability, the only way it will really happen in the longer term is with increased supply. The more money is chasing a particular asset, the more the price increases.

There’s also the issue of building costs for new stock. Tradies earn a lot more nowadays than they used to, and this has contributed also. Is this a problem? Not if you’re a tradie!

creative_canberran 11:51 am 12 Oct 11

johnboy said :

The Liberals are citing this CT article as their source:

http://www.canberratimes.com.au/news/local/news/general/tax-accounts-for-35pc-of-new-house-cost/2308905.aspx

The article says “high cost of new housing”, so I suppose when one factors in stamp + gst + land tax could get that fairly high, but it still seems excessive unless they’re also adding in the taxes applicable to financing and so on over a long period.
The report is by the Centre for International Economics so will have to look at that for more detail.

Chop71 11:50 am 12 Oct 11

johnboy said :

The Liberals are citing this CT article as their source:

http://www.canberratimes.com.au/news/local/news/general/tax-accounts-for-35pc-of-new-house-cost/2308905.aspx

Can’t blame Zed for that article.
… and it would be pretty close to the mark.

intaba 11:49 am 12 Oct 11

So the Liberals are citing an almost two week old article with the headline of “Tax accounts for 35%…” to claim that 50% of the cost of a house is tax?

johnboy 11:35 am 12 Oct 11
arescarti42 11:11 am 12 Oct 11

Grail said :

All a land bank is going to achieve is to push the prices of houses higher, since new buyers will be able to buy their first homes for less money. This means when they sell they’ll have far higher equity in their existing home and thus more buying power.

No, it means they’ll have somewhat less equity. For example, If i buy a $200k home with a $30k deposit, I pay $70k off the loan before selling it for 10% more than I bought it, then I have $120k in equity. If i buy a $400k home with a $30k deposit, pay $70k off the loan before selling it for 10% more than I bought it, then I have $140k in equity.

Grail said :

If the Liberals are serious about affordability they’ll look at affordability not list prices. One way of increasing affordability regardless of prices is to allow owners to claim tax deductions, the same way investors do. This will even out the playing field.

No, that does nothing to affordability and will push up prices. All tax deductions would do is allow people to afford bigger loans to bid up prices with. It would be a good way to piss away tax revenues though.

Grail said :

This will allow families to buy a house they can afford, make the most of negative gearing under Federal tax law, and gain the benefit of someone else paying the rent on the family home they plan to move into later.

Just thought I’d point out that negative gearing only works as an investment strategy if capital gains are massive. It’s a very good way to lose lots of money if prices are going no where or down, which they currently are.

Grail said :

Go back and look for that article on the RiotACT about the “tax secrets of the rich” book. It’s worth reading through and going to talk to your accountant about.

And that was a paid for advertisement, not an article.

Grail 10:20 am 12 Oct 11

All a land bank is going to achieve is to push the prices of houses higher, since new buyers will be able to buy their first homes for less money. This means when they sell they’ll have far higher equity in their existing home and thus more buying power.

If the Liberals are serious about affordability they’ll look at affordability not list prices. One way of increasing affordability regardless of prices is to allow owners to claim tax deductions, the same way investors do. This will even out the playing field.

Alternately, set up an official “rent from your mates” education campaign to help home buyers establish “arms-length” deals with others to rent their properties while renting out the property being bought. This will allow families to buy a house they can afford, make the most of negative gearing under Federal tax law, and gain the benefit of someone else paying the rent on the family home they plan to move into later.

Go back and look for that article on the RiotACT about the “tax secrets of the rich” book. It’s worth reading through and going to talk to your accountant about.

arescarti42 10:00 am 12 Oct 11

Well stamp duty on a $400k house is only about $15k.

The only way I can see the $190k in tax making sense is if you’re talking about new houses and include the revenue that the government gets in selling the land as a “tax”. If you really wanted to, I guess you could also include GST on construction of the dwelling, but that’s going to be maybe $10-25k, and you can’t blame that on ACT Labor.

Of course the average first home (particularly in Canberra) is not necessarily a new build, so the land sales revenue “tax” theory doesn’t work.

johnboy 9:54 am 12 Oct 11

I’ve asked Zed’s lovely spinner how the number was reached, will let you know if I hear anything.

ps0104 9:48 am 12 Oct 11

Agreed that a figure like $190k needs a further breakdown. I would bet that the majority of that is Fed taxes and Zed is playing the spin game.

Johnboy- any chance of putting the pressure on Zed for a breakdown?

colourful sydney rac 9:42 am 12 Oct 11

What makes up the $190,000 in taxes?

Morgan 9:41 am 12 Oct 11

Yes, while I dont neccessarily disagree with you Zed, we need a breakdown of that $190,000.

Thumper 9:40 am 12 Oct 11

We also know the average home has around $190,000 in tax alone

Hmmm, I’m not sure that this is correct.

vanaalst 9:30 am 12 Oct 11

Dear Mr Seselja,
Could we please see a break down of the claim that $190,000 of the $400,000 is in taxes, broken down by which are Territory Government responsibility, and which are Federal Government?
Also, if you plan to reduce the level of ACT Gov’t taxation from the construction and land sectors, could you please indicate how you would either replace these with other taxes, or alternatively reduce Government spending to ensure a balanced budget.
Thanks

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