Monday, May 16, 2011

How Stamp Duties Distort the Market

Stamp duties are the bane of the property industry. Not only are they inefficient, but they also make our country over-dependent on property revenue.

Our property taxes (stamp duty and land tax) account for nearly 9 percent of our revenues as opposed to an overseas average of 6 percent.

A major problem with stamp duties on property sales is that they create a “lock-in” effect by discouraging homeowners from moving which dampens market activity. This is particularly harsh on first homebuyers when fewer new properties are being constructed.

There is also an inflationary effect, because every time a homeowner wants to sell, they need to bump up their price just to recover stamp duties.

Because they don’t want to pay stamp duties twice, families will often buy larger homes than required, figuring their families will eventually expand in size. This creates extra financial pressure.

People wanting to upgrade their circumstances, which is natural when one’s income increases, are often discouraged from doing so by stamp duties and have to settle for renovating their existing property.

Worse yet, older people wanting to downsize are likewise prevented from doing so because of the necessity to sell for more money to pay off the stamp duties.

The Federal Government’s own Treasury department found 125 separate federal, state and local taxes a year. Ten of these raised 90 per cent of tax revenue which indicates that the remaining 115 may be inefficient and need to be rationalised.

If you have a question about real estate, or would like assistance in locating a property, feel free to phone me, Noel Thompson Principal Professionals Logan Lifestyles at either Browns Plains 3800 4000, Marsden 3200 4495 or Springwood 3808 5544.

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