A major mortgage franchise is recommending state governments lower stamp duty and instead put in place a broad property tax on all residences.
In a submission to the Senate inquiry into housing affordability, AHL Investments (
Aussie) said the complex issue of housing affordability can be addressed through encouraging efficient housing supply, reducing inflationary housing demand factors and smoothing market volatility.
“Despite the recognised physical, emotional and financial benefits of home ownership, and its position as an intrinsic part of the 'Australian dream', home ownership is becoming increasingly challenging for young and low income Australians…[and] should therefore be addressed,” said the paper, submitted by executive chairman John Symond.
But so far, any government intervention to try and solve housing affordability issues have concentrated on demand-side issues, and resulted in stimulatory policies aimed at first home buyers that include such as the first home owners grant.
While Aussie supports assisting first home buyers' entry into the housing market through certain targeted mechanisms, it said the stability and consistency of these initiatives – often reactionary measures – are a crucial factor in their effectiveness.
“Short-term incentives such as variations in the first home owners grant are typically ineffective in addressing housing affordability and instead simply place upwards pressure on prices, particularly when implemented with a limited timeframe,” Aussie said.
The franchise said its business experience of a thousand interactions per day with borrowers and potential borrowers puts it in a good place to comment on alternatives.
One of its recommendations is to lower stamp duty levels over time, potentially replacing revenue with a broad property tax levied on all residences.
“The extent of the duty is sufficient to discourage relocations that would drive the most efficient use of land. The strongest example of this is the deterrent to ‘downsizers’ who might otherwise be freeing up larger residences to accommodate young families,” Aussie said.
To create the most efficient use of residential property Australia should be seeking a system that encourages home owners to be flexible and to find the housing most suitable to their present needs.”
This suggestion is similar to that of the National Affordable Housing Consortium, which
recommended to the inquiry that stamp duty be abolished as it is a disincentive to mobility and downsizing.
Aussie also recommended that excessive tax concessions to investors are restricted.
“The tax concessions available to property investors have an inflationary impact on property prices that could be mitigated through appropriate management of these incentives.
“Concessions available to investors, namely negative gearing and the CGT discount, have been recognised by many as a structure that should be addressed in the housing affordability context.”
Aussie said to limit the impact of negative gearing concessions, controls should be put in place on the number of applicable properties or a ceiling on the amount of losses deductible in any given year.
These controls would limit “exploitative use” of these concessions, such as people claiming deductions on high-value or multiple properties, rather than target those diversifying savings for retirement, Aussie said.
The inquiry will release its report on 26 June.
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