Sunday, 27 May 2012

Housing industry calls for urgent tax reform

The residential building industry is being weighed down by excessive and inefficient taxation, according to independent research released by the Housing Industry Association (HIA).

In some states the total tax bill amounts to over 40 per cent of the final price of a new home, with taxes on new housing putting the brake on economic activity, while representing a constraint on housing affordability and labour productivity.

The report by the Centre for International Economics (CIE) finds new housing is the second most heavily taxed of Australia’s largest sectors, being those valued over $10 billion. It also finds a majority of the taxes are inefficient, with stamp duty clearly demonstrated to be one of the biggest offenders. The HIA says stamp duty is particularly inefficient, but it’s not alone as an excessive and inefficient tax, which acts as a disincentive to one of the fundamental tenets of Australian life – the provision of shelter.

The HIA is calling on the Commonwealth to lead the process of reforming the myriad of state, local, and federal government taxes on new housing, adding reforming inefficient taxation on housing is an investment guaranteed to pay a dividend.

Fast facts
- The taxation of housing contributes almost $40 billion dollars to revenue, which equates to 11.3% of total local, state and Commonwealth government revenue.
- This makes housing, in absolute terms, the second largest contributor of tax to Australian governments.

Home buyers more cautious

Canberra property sales have slowed significantly over the past two months as buyers tread more cautiously, according to Active Property Sales Executive Michael Searle.

Economic uncertainty and the impending introduction of a carbon tax are believed to be among the contributing factors.

There has also been a surge in the number of new properties hitting the market, which in turn has placed pressure on the sale of established homes.

There are hopes of another interest rate cut to stimulate the property market over the coming months, but in the meantime homeowners are reminded property is a long-term investment.

“There’s local uncertainly and global uncertainty and it’s been a year of people sitting back on the fence,” said Mr Searle.

“Once the supply evens back out we’ll return to a normal property cycle.”

More positively, property priced according to the market is still moving “fairly quickly”, with entry level housing ($350,000 - $400,000) in popular demand among home buyers.

“Even though things have stabilised in the market, rest assured the fundamentals in property and what it has to offer can be demonstrated on a national scale whereby Canberra is still deemed a safe haven for property investment and high rental returns.”