Since the COVID-19 outbreak, Western Australia has experienced one of the strongest real estate markets out of all the states and territories, with sales price growth expected in the next 12 months.
Thanks to the low interest rates, many are choosing to purchase their next home, which has contributed to this. However, there are those who would appreciate the chance to upsize or downsize their property yet cannot do so due to the significant cost of stamp duty.
This is an issue across most Australian states and territories, with stamp duty renowned as being one of the biggest financial barriers to home ownership and mobility. The current system is over a century old and is in desperate need of a major overhaul.
What has NSW announced?
Recently, the New South Wales Government released its budget papers which includes commencing a public consultation process to seek the community’s view on tax reform to reduce the upfront cost for property buyers.
The proposed changes to stamp duty would see buyers able to choose whether to pay the stamp duty upfront or opt into a new model that would see them pay a small annual fee for the life of ownership of the property.
Why is this significant?
This is big news as NSW aims to begin the process of strategic stamp duty reform as early as mid-2021. The reforms could inject more than $11 billon into the NSW economy in the first four years alone, while boosting NSW Gross State Product by 1.7 per cent over the long term.
This type of consultation is something REIWA has been calling on the WA Government to consider during each budget, however, was advised this would not be put on the table for the last budget nor would the McGowan Government consider this for the State Election.
How will this benefit WA?
REIWA recently undertook initial economic modelling on the potential impact that a broad-based tax system would have in place of stamp duty, as well as a targeted approach aimed at seniors and first home buyers before being rolled out universally.
Specifically, what this means is, by introducing a broad-based tax system, payments will be made over a longer period, allowing those who need to move, the ability to do so. Having an opt-in model only on new transactions will mean that those who have paid stamp duty are not unduly hit by the replacement tax.