Chief Minister Andrew Barr has called for the national abolition of stamp duty in exchange for the scrapping of First Home Owner Grants as a way to make housing more affordable.
Mr Barr, who will take the proposal to the next meeting of State and Territory Treasurers, said stamp duty was an inefficient tax and the First Home Owner Grants were counterproductive, only serving to drive up house prices.
“Every economist in the country agrees that stamp duty is an inefficient tax, and one that puts another hurdle in front of first home buyers by forcing them to either borrow or save tens of thousands of dollars on top of the cost of housing,” Mr Barr said.
He said that while most jurisdictions had concession or exemption schemes – including the ACT – the eligibility thresholds often lagged behind the real price of a home in today’s markets.
“State and Territory Governments can cut this entirely in a fiscally sustainable way by removing the First Home owner Grants at the same time,” he said.
These grants no longer serve the purpose for which they were created – and arguably make housing less affordable.
They fuel price growth by adding many times their dollar value to the borrowing power of purchasers, and distort decisions about where and what property people buy – channeling demand into particular segments of the market, driving up prices further.”
Mr Barr believes that this approach would deliver far more effective support to those trying to buy their first home.
This week he foreshadowed further stamp duty cuts as part of the ACT’s tax reform process, which seeks to eventually replace stamp duty with broad-based land taxes.
“We are prepared to do this in the ACT by accelerating the removal of stamp duty specifically for first homebuyers ahead of our broader phase out. I will be putting this on the agenda for discussion at the next meeting of State and Territory Treasurers to ask my colleagues to do the same,” he said.
Master Builders ACT Chief Executive Officer Michael Hopkins welcomed the Chief Minister’s proposal to accelerate the removal of stamp duty specifically for first home buyers ahead of the broader phase out.
“Master Builders ACT wants to keep home ownership within the reach of all Canberrans. First home buyers, particularly young couples and families, feel locked out of the ACT market and measures such as stamp duty concessions can assist them,” Mr Hopkins said.
“The housing data shows that the states that provide greater stamp duty relief for first home buyers also have a much greater share of first home buyers in the market.”
He urged the ACT Government to consider stamp duty reforms together with the impact of the recent $30,000 increase to the Lease Variation Charge (LVC), increases in rates and other hidden charges that impact housing affordability.
The Housing Industry Association said stamp duty was a bad, inefficient tax.
“Stamp duty is an inefficient tax that stifles building activity, and is one of the big impediments for first home buyers,” said HIA Executive Director ACT and Southern NSW, Greg Weller
“It restricts the movement of people, whether to find work in other cities or to downsize, and it adds to the difficulty of buying a house for prospective first home owners.”
But Mr Wellers urged caution about the Chief Minister’s call to abolish the First Home Owner Grant as well.
“The First Home Owner Grant is for new homes only and makes it easier to buy a dwelling, drives building activity, and strengthens the financial position of first home buyers choosing to build,” he said.
“If this did occur, it could be expected that the removal of the grant would be immediate, whereas the phase out of stamp duty is a transitional process that is occurring across a number of years. It is not inconceivable that a future government could choose to walk away stamp duty reform, yet it would be highly unlikely that a grant for first home buyers would be reintroduced.
“And as bad as stamp duty is, it is by no means the only driver of affordability problems in the ACT. Land supply and the cavalcade of taxes on home building, such as the recent Lease Variation Charge increase, need urgent attention first before considering removing the grant.”