The Real Estate Institute of Australia (REIA) has called upon the federal government to work together with the states and territories to tackle issues relating to affordability and property tax.
In its Pre-Budget Submission for 2017/18, the institute urged the government to focus holistically by implementing consistent laws across the states.
“Strong population growth in Australia as well as changes in the demographic composition necessitates that the supply of affordable housing is addressed as a priority policy issue,” REIA president Malcolm Gunning said.
An inefficient tax system
The REIA urged “the Federal government to show leadership in addressing housing affordability by taking a co-ordinated and holistic approach of all levels of government in objectively addressing all property taxes,” Gunning said.
Citing stamp duty as one of the “most inefficient taxes levied in Australia,” the institute’s submission listed the tax’s negative effects including consumer impacts, added transaction costs, impeded economic growth and the underutilisation of housing stock.
Stamp duty was a major hurdle for both first home buyers and older home buyers, Gunning said.
“For first home buyers stamp duty often makes the difference between the ability to buy and not to. For older home owners considering downsizing to accommodation more suited to their needs in retirement stamp duty is frequently given as the reason preventing such a move.”
As state governments cannot get rid of stamp duty without going into deficit or reduce expenditure, the REIA said that reform was only possible with cooperation between the federal and state governments.
Support for aspiring buyers
High levels of home ownership are also beneficial to Australia, the REIA said, and urged the government to take more measures to sustain this over the long term.
Through its submission, the institute recommended the Commonwealth implement solutions to support aspiring first home buyers, noting that this assistance “should be uniform and should not discriminate between buyers of new or established housing”.
Current provisions are inadequate given that FHB allowances are limited to new dwellings and remain inconsistent across the states, the REIA said. This, along with higher levels of investor activity, has cost first home buyers.
“The number of first home buyer commitments as a proportion of total owner-occupied housing finance commitments in November 2016 was 13.8% and compares to long run average of 18.5%,” Gunning noted.
“Since April 2012, when official interest rates were 4.25% compared to the current 1.5%, the number of home loans issued to home buyers increased by 25% while the participation of first home buyers declined by 17%.”
Finally, the REIA recommended giving prospective buyers access to a portion of their superannuation to help them save for a deposit. This could either be a fixed percentage or an amount of voluntary payments over and above the super guarantee contribution.
“Superannuation and home ownership are both components of a retiree’s ‘nest egg’ and not competing products. By buying earlier in life, retirees have every prospect of having a higher equity on retirement and a larger ‘nest egg’ on downsizing.”
This strategy has already been successfully used in Canada, New Zealand and Singapore, the institute said.
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