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WA budget needs initiatives to reach housing targets

Wednesday, 4th May 2016
Categories: Market News, Newsletter

downsize needAn exemption of transfer costs for downsizers and changes to stamp duty taxes for off-the-plan purchases should be prioritised by the Western Australian government to help achieve the state’s housing objectives.

The state government must use its upcoming budget to implement initiatives that work to reach the goals set out in its long-term planning blueprint, Directions 2031.

A failure to act risks Perth’s future liveability as key targets to accommodate the city’s growing population aren’t being met.

These initiatives should include:

  • The introduction of a one-off stamp duty exemption for downsizers
  • Changing how stamp duty is charged to off-the-plan purchases so it’s only applied to the value of the land

A one-off stamp duty exemption should be implemented for people over 65 who are selling their family home to downsize.

The exemption should be available in any cases where the family home sells for less than $1 million.

Currently, many older property owners are hesitant to downsize because of the high stamp duty costs involved with buying another dwelling.

A one-off exemption would provide a significant incentive for these people to downsize and help free up more land in established areas for development of more higher-density housing options.

The government must also change the way stamp duty is applied to off-the-plan purchases if it wants to drive more buyers to higher density housing options.

One effective method, which is utilised in some other Australian states, is to charge stamp duty on just the value of the land, rather than the combined value of the land and the dwelling.

This should only be applied to off-the-plan purchases made before construction starts on any such proposed development.

For example, a $1 million block with 30 proposed apartments would mean the value of the land of each apartment would only be approximately $33,000 – this is the value which the buyer would then pay stamp duty on.

This would incentivise people to buy into high density housing developments at an early stage, as they save on the stamp duty, and also assist developers attain finance for these projects, as lenders typically require about 60% presales before providing funding.

These two initiatives are in line with the state’s planning blueprint, which aims to increase residential development infill to 47% of new housing.

The most recent data shows that the infill rate is significantly behind their target sitting at just 28%.

It’s evident that not enough is being done to achieve these goals, particularly when forecasts show that Perth will need another 800,000 new dwelling to accommodate its population as it grows to 3.5 million residents in the coming decades.

The state government needs to act in its upcoming budget to implement these tax policies that are in line with Directions 2031 or risk continued urban sprawl and increased pressure on public infrastructure.