THE Real Estate Institute of WA (REIWA) has entered the State Election fray, releasing a wish list to which it wants our next State Government to commit.
The list includes no increases to state property taxes, the abolition of land tax aggregation rules, transfer duty concession for off-the-plan transactions, and transfer duty exemptions for seniors “right sizing” into more suitable dwellings.
REIWA president Hayden Groves said reforms were overdue, with the property market changing significantly over the years, and would benefit both the market and the government.
“The State government is heavily reliant on property taxes; 33 per cent of their revenue receipts come from property taxes, and of that 50 per cent is transfer duty, so half of a third of their income is tied to the volatility of the market,” he said.
“A fall in transactional activity puts pressure on the government, and in the past 10 years, sales volumes have fallen 52 per cent from 71,663 at the end of November 2006 to 34,138 in the 12 months to the end of November 2016.
“Transactions have halved and their revenue from stamp duty has about halved.
Mr Groves said increasing stamp duty was not a viable option as it would affect affordability and discourage people from moving.
“In the absence of genuine long-term tax reform, we want the government and the Opposition and every other political party to commit to reviewing their State taxes and finding more sustainable ways in which to generate income at a state level,” he said.
Mr Groves said REIWA’s wish list was designed to be realistic, achievable and easy to implement.
It hoped to get support for all four, but concessions for seniors “right sizing” and off-the-plan apartment purchases were its preferred options.
“They would have an immediate and positive impact on the market, and not only the property market,” Mr Groves said.
“One of the blockages associated with transactional activity is transfer duty. When you remove transaction costs you make housing more affordable; let’s create activity in a way that makes it affordable for people to enter the market or continue to invest in the market.
“But I’m not just talking about (more) transactional activity, I’m talking about planning policy dovetailing into Directions 2031, housing affordability, releasing aspirational stock out there into the market, stimulating transfer activity; it would cover a lot of bases.”
Over the next few weeks, REIWA will be launching its policies in detail on reiwa.com and asking for public feedback.
REIWA’s wish list
- No increases to state property taxes and committing to a state tax review
At present, the transfer duty on a median-priced house in the Perth metropolitan region of $520,000 is $18,715. Any increase to property taxes will diminish affordability and reduce flexibility for trade-up buyers and downsizers or resizers
- Abolish land tax aggregation
Aggregation rules unfairly penalise investors for owning multiple properties as investors are taxed on the total (aggregated) unimproved value of their land holdings, not on each individual property.
- A 50 per cent concession to transfer duty on all off-the-plan apartment purchases.
Apartments that are sold off the plan are liable for transfer duty on the full sale price of the dwelling, while house and land packages are typically only assessed on the land component. This creates a disincentive to buy an apartment for either home ownership or investment.
- An exemption to transfer duty for seniors aged over 60 when “right sizing” from their primary residence.
High transaction costs, such as transfer duty, deter seniors from moving from their existing dwellings, which are usually larger sized homes, to “right sizing” into more suitable dwellings to meet their changing needs.
What the major parties said
Treasurer Mike Nahan
The State Government’s recent housing announcements, including the boosted First Home Owners Grant and changes to Keystart eligibility, will be a welcome shot-in-the-arm for everyone employed in the housing construction sector.
WA would need to significantly increase its current land tax rate to abolish transfer duty. This is just not practical.
Across all land values, WA’s land tax rates are lower today than they were in 2005-06 and 2006-07 and remain below that of most other states at lower land values, and more than competitive at other values.
Opposition spokesman Ben Wyatt
WA Labor appreciates fully the negative impact the large increases in land tax have had on the local economy.
WA Labor has no plans to increase stamp duty but also does not plan to make any significant cuts in stamp duty revenue.
Due to the record operating deficits that have been delivered by the Liberal Government, WA Labor cannot justify debt-funding tax cuts at this time.