Rising stamp duty rates are blocking homeownership in Sydney and Melbourne

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The astronomical cost of property in Sydney and Melbourne is not the only obstacle that is stopping homebuyers and investors from entering these markets, states CoreLogic’s latest Property Pulse report. Another factor that is contributing to the high entry cost to housing is stamp duty, particularly in Australia’s two largest capital cities.

Stamp duty is levied by each state and territory, and is payable by the receiver when a property is transferred. It varies across the states and territories based on the price of the property, the type of buyer, and the type of property.

“Calculating how much stamp duty is applicable on a property purchase can be confusing due to the significant differences regionally, but also due to the complexity of rules, concessions and limits that are applied to the calculation of stamp duty,” noted Tim Lawless, CoreLogic’s head of research.

Based on the median dwelling value across each capital city, stamp duty estimates can ranges from a jaw-dropping $32,680 in Melbourne to a modest $9,007 in Brisbane.

“Even though the median dwelling value is $200,000 higher in Sydney compared with Melbourne, the cost of stamp duty on the median valued home is actually slightly lower in Sydney, at $31,763, due to higher stamp duty rates in Victoria,” said Lawless. While first-home buyers can be offered substantial concessions on stamp duty in some states, there is generally an upper limit.
“For example, first home buyer property transactions in Victoria with a price tag of $600,000 or less will enjoy a 50% reduction on their rate of stamp duty. In Queensland, first home buyers purchasing a property priced less than $550,000 can realise a discount of more than $8,000,” noted the CoreLogic report.

Stamp duty rates can also be higher for property investors. Surprisingly, even though New South Wales has the largest proportion of investors among the states and territories, NSW does not charge a premium rate of stamp duty on the investor segment of the market. The three largest states also charge a stamp duty premium on property purchases by foreign buyers.

“Because stamp duty costs are percentage based, as dwelling values move higher, stamp duty costs can rise disproportionately faster due to bracket creep. Over the past five years dwelling values in these two cities have increased by 62% and 38% respectively which implies at least a commensurate rise in stamp duty costs in these cities.

“The high transactional costs associated with housing are likely to be one factor that is contributing to a slowdown in the number of sales across the country.”

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