In a world of tribal news and where too many brains and eyes are controlled by less than mind enriching social media platforms, a Labor guy like Chris Barr would be a virtual unknown outside of the ACT, which he has led for 13 years! Sure he has a lot of public servants who don’t trust conservative governments but he also is pretty good at politics and knowing his constituency, which history shows go hand-in-hand.
That’s why I wasn’t surprised to learn that Barr has become the first national leader to kill stamp duty for first homebuyers. In a country where a lot of older Australians and very public-facing politicians are crying for young people to get into the bricks and mortar scene, why aren’t all state leaders signing up for this great idea, which was a starring feature in yesterday’s ACT budget.
Well, here are a few reasons:
- Most state governments waste money on stupid, political projects.
- They carry big budget deficits, especially since the pandemic.
- Our leaders have done nothing concrete to actually increase the supply of housing to match the current and future demand.
- If the supply of houses does not increase significantly, then increasing demand by cutting stamp duty could mean more buyers at auctions and higher prices!
- Young people, like all employees in this country, lose 12% of their pay to super and we wonder why home ownership is hard.
For those in the ACT, the stamp duty will no longer apply to properties sold for less than $1.02 million and for assessable incomes up to $250,000. After that level stamp duty starts to apply.
Looking at the policy, The Australian’s Thomas Henry reported that Chief Minister Andrew Barr said: “This budget marks a major milestone in our long-term tax reform program, delivering a fairer system and improving housing affordability.
“At its core, there has been a sustained focus on removing barriers to home ownership, and today we announce the completion of a key element of this reform by abolishing stamp duty for all first-home buyers.”
This initiative from Barr would be even better if the Albanese Government’s success with its housing policy was laudable, however, the opposite is the case.
In case you forgot, the Government’s plan was 1.2 million homes to be built over five years to 2029. In late March we learnt that the National Housing Supply and Affordability Council revealed that nationally, just 18 per cent or about 219,000 homes had been completed since the PM’s housing policy started. At the current rate of housing construction, the target will not be met until mid-2030.
But what’s worse is that a housing economics academic, Professor Christian Nygaard at the UNSW’s City Futures Research Centre told The Guardian that even if the Government achieved its target in the promised timeframe, it would not be a great help to getting young people into properties!
Looking at future demand and even assuming governments kept pumping out 1.2 million homes projects over 15 years, the improvement in the national house-price-to-income ratio of the current 8 would only drop to 6.7. That’s not a big gain for homebuyers.
In Sydney that number is now 12 but it would only drop to 10 if housing supply delivered on the Albanese Government’s housing policy goals.
This country has a housing crisis, and it needs a serious inquiry into what needs to be done to really boost supply. And that’s why the Barr killing of stamp duty is timely.
You see, taxes on builders and developers have pumped up the cost of building a home by over 30%. This means homes are dearer and fewer are built, and it’s why the Productivity Commission wants governments to seriously reduce red tape for all industries.
Until our political leaders get serious about solving our serious housing crisis, which will mean that state premiers, in particular and also local governments, will have to stop milking those businesses in the construction industry that make homes happen.
The problem this country faces was once aptly explained by a warning from the then Prime Minister Paul Keating in the 1990s after trying to make a deal with his state counterparts. This is what he said: “You should never get between a premier and a bucket of money.”
Andrew Barr has given a great example, but I doubt we will see this as the start of something great from the very taxing leaders of our country. I live in hope but as I say to my financial planning clients: “Hope is not a strategy!”
Barr has done some good stuff with housing, but the bigger picture of ACT Govt restricting land releases for housing has pushed land prices much higher. They continue to run with large annual deficits and miraculously say that this year’s deficit ($300 mil) will be followed by a surplus of about $280 million the following year. History says that won’t happen. They also continue to roll out light rail that is projected to return maybe 30 cents in every dollar invested ( and some services that now take 15 mins by bus will take 25 mins by light rail). The larger picture is quite dismal.
Good words here but I am soo disappointed with Australian Govts. They are gradually taxing us out of existence
Land release is one strategy but when it is even too costly to build a house in the first place because of all these incremental costs, what is the point of more land release?