Removing stamp duty, building more homes and expanding government assistance schemes are among the actions leading real estate experts have called for under an inquiry into housing affordability and supply in Australia.

The House of Representatives Standing Committee on Tax and Revenue has received 126 official submissions regarding stamp duty and tax reform, with the Reserve Bank of Australia, industry peak bodies and Raine & Horne all voicing their views.

The Chair of the Committee, Mr Jason Falinski MP, stated that - “As data provided by the Reserve Bank of Australia (RBA), the Treasury and the Australian Bureau of Statistics (ABS) shows, homeownership, one of the building blocks of Australian society, has been falling for the last 30 years. In my view, this represents an urgent moral call for action by governments of all levels to restore the Australian dream for this generation and the ones that follow.”

“Arguments about the impact of increased subsidies and tax concessions on housing have continued for some time. There is ample evidence that points to the small effect such measures have on supply, indeed the research points to limitations on land and restrictive planning laws as the major causes of shortages in supply. As consistently noted by the RBA and others, regulatory settings are directly responsible for the unresponsive nature of housing supply in Australia.” Public hearings for the inquiry will be held on a date to be confirmed.

Breaks needed for older property investors 

In its submission, Raine & Horne called on the Federal Government to consider capital gains tax breaks for older investors as airing its concerns about stamp duty. The Superbrand’s Executive Chairman Angus Raine noted increased real estate values during the pandemic has made it more challenging for older property investors – defined as baby boomers and the silent generation – to sell long-term assets.

Angus suggested that property held by older investors contributes to supply challenges in capital cities and recommended that the government reassess a policy approach from 2007 to address the current issues. “One option to breaking this supply impasse is to provide older investors with an exemption for, say, 24 months on the payment of the CGT liability,” Angus said. “Moreover, this tax deferral could encourage older investors in much the same way the decision by the Howard Government in early 2007 to make transitional changes to superannuation.” At the time, the Federal Government opened a short window of opportunity for retirees by allowing them to make up to $A1 million in after-tax superannuation contributions before July 1, 2007.

Consequently, property listings in Sydney skyrocketed as older property owners cashed in their housing chips and redirected their retirement savings to superannuation to take advantage of the tax changes. Under the federal government’s super regulations, money received from a taxed super fund was made tax-free for people over the age of 60, making it the most tax-effective investment for retirement at the time.

The spike in listings freed up tightly held markets and had a ripple effect down to entry-level markets. “I’m confident 14 years later that a CGT tax holiday could have a similar impact by encouraging older property investors to sell, creating a more direct and affordable entry point for younger buyers, especially those seeking homes in many inner ring property markets in our capital cities.

Not so fast with an annual property tax

Also, in the submission to the Select Committee, the Raine & Horne Chairman commented on tax changes aimed at giving property buyers the choice to pay stamp duty, land tax or a small annual property tax. “I have concerns about how an annual property tax would work and any possible unintended consequences,” he argued. 

“We need to make sure that we aren’t robbing Paul to pay Peter by introducing an annual tax that will place more financial stress on landlords with multiple investment properties, who are already struggling under the weight of COVID-19 rental laws.”

Angus also shared his opinion that the First Home Owners Grant and related subsidies have contributed to surging conditions and hindered housing affordability.

To read Raine & Horne’s submission, visit the House of Representatives Standing Committee on Tax and Revenue website.