NSW to Phase out Stamp Duty

That's the crux of it, and probably the reason they want to phase out the choice between stamp duty vs property tax.

 

Yep, I believe this is a ruse to get Land Tax from all properties, including PPOR's, not just investors who are over the threshold, and for that reason alone, I really hate the idea. It's not going to really impact me over my lifetime, but for future generations this will be a killer.

 

I basically disagree. The effect will be to remove friction from the housing market allowing people to better align their housing with their current needs as they change (including investors changing the location and type of housing they invest in). This includes changes in family size and structure plus being able to move more easily for work and lifestyle reasons.

The time frame for the proposed property tax to balance the cost of stamp duty looks like 20+ years but there is of course some uncertainty about future rates. I for one have moved my ppor 4 times since buying my first home in 1972 so an average stay of 12 years. The average length of ownership for Australia is 11.8 years. Am I better or worse off if I had the property tax option - impossible to tell but it would be pretty much line ball. Of course if you choose to live in the one property for ever it will be more costly but very few do.

 

I'm not sure of that. Maybe us investors move more often that others because we want more....I'm not sure, but looking at the people living near me, most of them have been there for well over 20 years. Neighbours on either side have been there since they bought their first home. One has 20yr old kids, the others kids moved out & married before we moved in, so we're talking a long time. Across the road there's a 102yr old man who built the home 40+ years ago, next to him a lady in her 90's with a similar story. Just up from them, another couple who bought about 30yrs ago. In fact, other than a youngish couple who've been here about 9 years now & just did extensions, we're the only newbies.

Looking to family, out of my Hubbies siblings (I don't have any) Going from oldest to youngest.
1) Bought in 1970's ..... divorced but wife still lives there.
2) Bought in 1970's still living there
3) Bought in late 1980's still living there
4) Moved regularly.
5) Bought in 1970's .... divorced but wife stayed there until just a few years ago
6) Bought in 1980's still living there.

Us....well we've moved several times as we've upgraded. Would not have done that if we didn't invest as we wouldn't have been able to afford the upgrades.

 

Would they want to move if they didn't have to pay stamp duty on their next house? Maybe they'd like a sea/tree change but the current cost of moving is too high? I do think that, as a society, we're becoming more mobile.

 

I'm not sure. I'm a lot older than you, so maybe it's the generation. People used to buy a house & stay there, but I think the younger generations are a bit more mobile.

 

There's also an argument for this. The couple might actually be better off selling and moving, but the cost of renovating is lower.

With stamp duty so high, is it better to move house or renovate?

 

The point is for more people to pay yearly proportionate to property they own including ppor. Long term the total tax paid will be more. But spread over a wider base.

its not about whether someone is better off or not, but whether the system itself is fairer.

 

Agreed. I was suggesting the current system creates inefficiencies in the market, with people choosing to stay put and renovate when it may suit their lifestyle better to move. With every property on the property tax system, there is no longer an impediment to moving.

 

Except agent's fees (which could decrease in future if there's higher transaction volume).

 

My 2c. People sitting on developable property has been a bugbear for developers for a very long time. Politicians and media stirring up the boomer v millennial thing was an attempt to create public support for land tax. Land tax over stamp duty will incentivise living in apartments over homes with a decent land component.

Stories of empty nesters sitting on large family homes with big (developable) land making it impossible for young people to buy in these areas. Promoting downsizing to free up these family friendly (development) properties, stamp duty being an impediment to this downsizing.

Whilst long term the concept would create cities able to cope with higher population through increased apartment living and less sprawl I really don’t like the thought that people could be effectively taxed out of their family home.

 

Agreed. Infact, my own parents held on to a prime development site for years for no real reason other than they just happened to have brought it cheap a long time prior, and had no incentive to get rid of it.
When they eventually did sell it was developed into a multi story apartment complex where many more families could live.

I dont think anyone will really be taxed out of thier PPOR as the rates are so low.
Sure, things may change in the future but we already know nothing is constant in life.

 

One interesting side effect of this change will be whether properties that are not locked into land tax will deliver a higher sales price due to buyers from both camps being interested.

Depending on the property in question, I believe it will. Buyers with a long term mind set will be only be looking at properties that offer a Stamp Duty option. So not only will paying stamp duty upfront be beneficially for long term holds, it will also offer a premium when selling.

 

There was a discussion about the reverse of this. During the initial period, do not allow people to choose property tax for expensive properties, because that would be too big an upfront hit to revenue.

Would like to see what the rules are around deceased estates for this.

In any case, they are likely to phase out the choice over time.

 

IMO it’s different now days. People my age don’t stay put and move or upgrade quickly. I don’t really see people sitting in the same home’s as long as previous generations

We don’t have the same mindset, we want new phones, new cars, new clothes, new experience’s and holidays. Houses are not that different just a lot slower to transact.

I’ve shifted homes 4x in 7yrs and I’m only 30, all Bought too. You get used to an area and move on and I know many my age that do the same. (Maybe not as often but at least every 4yrs) maybe call it not being content and always chasing a new experience or opportunity

 

Agreed.

Long gone on are the days where most expect a life of a stable job and a house with a white picket fence in the suburbs.

I am a Gen Y myself and complete career changes are the norm, as is the pursuit of 'experiencing life' over stability and predictability.
Casualisation of the workforce probably plays a significant part too.

Mobility and flexibility has a greater value nowadays IMO

 

What happens if I live in a house as Ppor and pay the upfront stamp duty and make it into an investment property and pay yearly land tax and then move back into the property as ppor?

 

As I read the proposal is that when you convert your ppor to ip then you will pay land tax at a lower rate than if you chose the property tax option for ips and when it reverts back to being your ppor the property tax will cease. Only seeing the legislation will provide a definite answer.

 

I think property tax is a much better idea than stamp duty and I wish Melbourne can scrap the stamp duty ( and I'm about to buy a second property in Melbourne)
Because it reduces the transaction cost and entry barriers and makes turnover much faster, and increase people's mobility and no making the sunk cost (5% of the purchase price) stop their way.
I have a brief look at the proposal, besides the social benefits, I think people are better off just paying land tax if they do not plan to live in /keep the same property for more than 20 (need to double-check the figures though) years. With all the first home, upsize and downsize, change location etc many people will be benefiting from the removal of stamp duty.

 

It sounds like a perfect description for honey trap.

People tend to make a decision between A or B when the single-choice question comes with only A and B.