Are property taxes a moot point?

So just a little thought I had today while ironing that I thought I'd run past people.

It's no news that SA has some of the largest expenses to get into property such as stamp duty and lodgement fees. At first this got me thinking that maybe I should look at investing elsewhere. Then on the flip side I was thinking about barriers to entry and how the greater that barrier to buy a property, the larger the rental market. So... with the high costs of entering the market the price of buying goes up, but so too does the demand for rental properties and thereby, assuming the supply levels weren't a factor, so too would rental prices. So, it becomes a moot point.

I haven't done any research into this, frankly it's not that important, but just a thought that crossed my mind.

 

I don't know Adelaide at all, but what are rental yields like? If Adelaide yields 3% and City X yields 4%, is there any point worrying too much about taxes? The 'cost' of a property is not the sale price,

Lots of other factors to consider ie: prospect for CG, selling costs etc

 

Huh???? You iron? I think the steam might be affecting your brain. Best to leave ironing to the professionals ..........In relation to housing, buy 1. Later on, buy another and so on.......

 

Firstly business shirts and trousers can be purchased these days that are no-iron. They look pretty good too. (Actually I have no idea whether his business shirts look good or not - Mr Angel works in IT and would rather wear a t shirt any day)

Secondly, I have no idea about stamp duties in SA, but your theory wont hold in Qld. At the moment, stamp duty to purchase for the majority of FHBs has been exempted. For upgraders and subsequent OOs, it is one amount, and for all IPs it is double the rate for OOs. (Boo)

In this situation, going from renting to FHB has one major barrier removed. I think you will find most states these days have stamp duty exemptions for FHBs unless they buy something that costs more than a prescribed amount.

But I like your thinking. Keep it up, I could be wrong....

 

State NSW
Property type Owner-occupied
Property price $600,000.00
Stamp duty on property $22,490.00
Transfer fee $138.80
Mortgage registration fee $138.80
Total fees $22,767.60

State TAS
Property type Owner-occupied
Property price $600,000.00
Stamp duty on property $22,497.50
Transfer fee $203.05
Mortgage registration fee $132.52
Total fees $22,833.07

State SA
Property type Owner-occupied
Property price $600,000.00
Stamp duty on property $26,830.00
Transfer fee $4,701.50
Mortgage registration fee $160.00
Total fees $31,691.50

 

Although looking at specific tax is not so rellevant as

$600,000 in Sydney buys crap but $600,000 is already buying decent property.

The interesting metric would be what the Median taxed stamp duty was per purchaser . This would tell how much per transaction most pay.

I would bet Sydney buyer are probably still paying more due to the higher median property price.

 

(sorry, I hate misspelled words ).

Those costs are just barriers to entry, holding costs are just as important and affect the owner on an on-going basis.

A more relevant analysis would consider all taxes including Land Tax.

I have seen land tax bills across various portfolios that take out 1/3-1/2 (sometimes more) of the gross rent

To improve rent will take significant investment by the owners (knock down, rebuild, redevelop etc) costing $100,000's and then land tax would again increase marginally but be spread over higher returns.

The best bang for your buck (IMHO) lies in apartments (low LV, lower maintenance, base level of rates/water), tenant is only renting 4 walls not the landscaping which they're expected to maintain.