The Australian Dream: Inquiry into housing affordability and supply in Australia report published by the Federal Parliament’s Standing Committee on Tax and Revenue has revealed the state of housing affordability and supply in Australia, suggesting critical recommendations on improvements to be made.
The inquiry and report received a generally positive response from those in the real estate industry, with Real Estate Institute of Australia (REIA) President Hayden Groves saying an important factor is the recognition that supply shortages are at the heart of the affordability challenge.
“Many of the recommendations look to planning and taxation at a local and state level, with some useful incentive-based ideas around assisting local and state governments in improving density in established urban areas,” he said.
“Greater density always increases supply and, in turn, provides more affordable housing solutions in our cities and regions.”
The report addresses housing affordability, planning and the housing shortage, social and affordable housing, deposits for first homebuyers, and taxes and charges.
Current federal tax laws and negative gearing were a key focal point of the report and addresses the supply issue impacting affordable rent.
“If you disincentivise private property investment, supply is constrained, pushing up rents,” Mr Groves said.
Mark Hay Realty Group Principal Mark Hay said the best recommendations were about negative gearing, interest rates and monetary policy.
“The report suggested the main focus should be on reducing the huge cost of levies, taxes and compliance to bring both land and built form to the market faster and cheaper,” he said.
“Some reports show that when first homebuyers purchase an existing home, they save between 40 per cent and 50 per cent of the purchase price compared to a new product.”
Mr Hay said the purchase price for new property was made up of costs which were burdened upon new buildings, ranging from federal taxes, such as goods and services tax, right down to developer contributions.
“By addressing these huge and officious regulatory taxes and charges, and speeding up the process, we will significantly reduce the affordability issues in Australia and at the same time speed up supply into the marketplace,” he said.
One recommendation is to replace stamp duty with land tax, stating it should be implemented over time.
According to the report, if states and territories implement this change, it would increase housing turnover, remove an unnecessary obstacle to homeownership and stabilise government revenues.
Mr Groves agrees that stamp duty needs to go, but does not believe swapping it with land tax is a feasible way to do so.
“We all know that stamp duty constrains labour mobility, unfairly impacts certain essential worker cohorts, constrains property investment, adds years to home mortgages and locks up supply of appropriate housing with ageing Australians,” he said.
“It’s not feasible to simply swap stamp duty with land tax, but a graduated or user choice system would work over time and provide a more reliable income stream to state governments.”
Mr Hay said most state governments did not want to tamper with stamp duty.
“Depending on how the change from stamp duty to land taxes is implemented, it would be suggested that it would have an increased effect of bringing some people into the market without the heavy impost of stamp duty paid upfront upon settlement if portioned more moderately over several years as a land tax rather than a huge upfront cost,” he said.
Mr Hay said it’s worth noting the report also talks about the non-economic costs of the tranquility and harmony of owning and living in your own home.
“Especially in the times of a pandemic and world chaos,” he said. “The economic cost can’t be measured amongst the comfort, stability and harmony attributed to families owning their own home in Australia.
“I think this is very touching and humanises an extremely important report.”