STAY UP TO DATE WITH LO­CAL REAL ES­TATE

Pilbara News - - Lifestyle - Hay­den Groves Hay­den Groves is the pres­i­dent of the Real Es­tate In­sti­tute of Western Aus­tralia.

In 2006, there were around 72,000 prop­erty trans­ac­tions in WA and the median house price in Perth was a smidgen un­der $500,000.

A decade later, trans­ac­tional ac­tiv­ity had fallen to about 33,000 sales and the median price is sit­ting at around $520,000.

We now have less than half the sales ac­tiv­ity.

Rev­enue to the Gov­ern­ment from trans­fer du­ties must have also at least halved.

Suc­ces­sive State Govern­ments have re­lied for too long on prop­erty-re­lated taxes, specif­i­cally trans­fer or stamp du­ties, as a source of re­li­able in­come.

Trans­fer duty and pay­roll tax are taxes con­sid­ered in­ef­fi­cient be­cause they act as ob­vi­ous dis­in­cen­tives to buy­ing prop­erty.

The trans­fer duty on a prop­erty priced around $520,000 is about $18,000, as­sum­ing you’re not el­i­gi­ble for a first-home­buyer’s con­ces­sion, and most buy­ers bor­row this money as part of their mort­gage, adding on many thou­sands to the life of their loan.

Trad­ing up to buy a big­ger fam­ily home for, say, $800,000, sets you back close to the same amount as the av­er­age an­nual salary in trans­fer duty costs.

We all know State Govern­ments need to raise money for im­por­tant in­fra­struc­ture and ser­vices, but bud­get­ing for in­come based on prop­erty taxes is mis­guided be­cause the free mar­ket de­ter­mines sales vol­umes, not the Gov­ern­ment.

In 2006, no one could have pre­dicted mar­ket val­ues would have stag­nated and trans­fers would have halved 10 years later.

For­ward es­ti­mates, typ­i­cally three years, aren’t much bet­ter, with suc­ces­sive govern­ments ei­ther un­der or over-es­ti­mat­ing rev­enues from prop­erty taxes year af­ter year.

About a third of all State rev­enue, other than the GST, is prop­erty tax-re­lated.

As part of its State elec­tion cam­paign, the Real Es­tate In­sti­tute of WA re­cently sur­veyed 455 mem­bers of the com­mu­nity at ran­dom, 90 per cent of whom said prop­erty-re­lated taxes were a bar­rier to them in­vest­ing in prop­erty.

In ad­di­tion, 85 per cent said they would con­sider buy­ing their first or an ad­di­tional prop­erty if it was guar­an­teed prop­erty taxes, like trans­fer duty and land tax, would not in­crease.

With hous­ing af­ford­abil­ity such a hot-but­ton is­sue, en­cour­ag­ing in­vest­ment in prop­erty by re­mov­ing tax­a­tion bar­ri­ers re­leases more prop­erty op­tions into the mar­ket, adds to hous­ing di­ver­sity, and opens the mar­ket to nat­u­ral un­en­cum­bered free­doms.

It’s time one side of pol­i­tics com­mit­ted to a State tax review and found a model that re­moved in­ef­fi­cient and out­dated taxes.

About a third of all State rev­enue, other than the GST, is prop­erty tax-re­lated.

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