The Housing Industry Association (HIA) has released a report commissioned from the Centre for International Economics (CIE) on Taxation of the Housing Sector. This Report is an update to the work undertaken in 2019.
This Report shows that:
- $576,000, or half, of the cost of a new house and land package in Sydney is government taxes, regulatory costs and charges.
- The value of taxes and charges in Sydney has increased by 38 per cent or $160,000 since the 2019 Report.
- The largest increase in the value of tax and regulatory imposts was in Brisbane, up by $179,000 or more than double (+106 per cent) compared to the 2019 Report.
- It takes over a year to obtain a development approval for subdivision, and up to seven months are attributed to unnecessary delays.
- $346,000, or 38 per cent, of the cost of a new apartment in Sydney is government taxes, regulatory costs and charges.
- The value of the tax and regulatory cost component of a new apartment has increased by $104,000 or 68 per cent in Brisbane compared to the 2019 Report.
“Australia has an acute shortage of housing because governments continue to tax new home building and impede productivity in the sector,” stated HIA Chief Economist, Tim Reardon.
“In Sydney, governments are adding in excess of half a million dollars to the cost of a new home, that new home buyers are then required to repay for decades as part of their mortgage.
“With half of the cost of a new home being taxes and government charges, new home buyers are spending 15 years of a 30-year mortgage just paying off that tax.
“New home buyers also have to pay interest on top of that tax. Over 30 years, the value of taxes plus the interest on it amounts to more than the value of the home itself.
“With government taxes, fees and charges so high, the term ‘house and land package’ may as well be changed to ‘house and tax package’.”
“In Brisbane and Adelaide, government taxes, fees and charges on new homes have doubled in five years. Not even the best, legitimate investment strategies could achieve that same level of return.
“The primary solution to resolve Australia’s housing shortages is to remove government taxes and red tape to allow the industry to deliver the homes Australians are demanding.
“Delays on getting approvals take much longer than the time it takes to actually build a home.
“New home building taxes appear to be the target of governments under fiscal pressure, seeking to find other sources of revenue. What they do not realise is that when they increase taxes on housing, there ends up being fewer of them.
“It is incongruous that governments set home building targets, while at the same time tax new home building even more. The more government tax new homes, the fewer homes will be built.
“Taxes on housing have not resulted in more of them being built. Higher taxes on new housing will only lead to fewer new homes and higher prices for existing homes. “If governments were keen to solve the affordability problem, they need to look at the tax they are imposing on new housing,” concluded Mr Reardon.
This article first appeared in HIA.
