Taxes imposed on housing were found to have constrained dwelling supply and inflated prices over the recent decades, leading to unnecessary financial pressure on Australians, according to a recent study.
The Housing Industry Association commissioned the Centre for International Economics to perform a bottom-up investigation of the magnitude of the taxes and red tape in housing costs. The assessment found that 10% of all government revenue is raised from taxes on housing.
New homes are one of the most heavily taxed commodities in the economy, coming in behind alcohol, tobacco, and gambling, which are imposed with "vice taxes", said Fiona Nield, executive director for HIA Victoria.
"Over the 10 years it takes to bring a house and land package to market, there is a long and cascading list of regulatory costs and taxes that account for up to half of the cost of the new house and land package in Sydney and up to 37% in Melbourne," she said.
Nield said an aspiring homebuyer in Melbourne might need to come up with up to $130,000 to cover additional costs, which include stamp duty, GST, land tax, council rates, and other required taxes. This figure does not include the extra $25,000 in development charges or the $80,000 due to red tape. These additional costs make the mortgage for homebuyers 60% to 100% more expensive.
"Governments have had a temporary reprieve from the affordability challenge as the recent fall in existing house prices and interest rates have offset the impact of some of these taxes and red tape," she said.
While green shoots in the housing market are starting to emerge, she said affordability would deteriorate again unless there is a structural reform surrounding the imposition of taxes.
"We need a coordinated national approach to addressing affordability that includes addressing the tax and regulatory system that constrains the supply of new homes and is the root cause of the affordability challenge," she said.
Top Suburbs :
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus an appointment is free.
We value your privacy and treat all your information seriously - you can check out