Australia is facing a significant housing supply crisis, with a projected shortfall of more than 106,000 homes by 2027.
This crisis is primarily a problem of supply and demand.
A growing population fuelled by a surge in migration has led to a demand for housing that far outstrips supply. This imbalance is driving up prices, making it more challenging for people to enter the market.
In a submission to the National Housing and Homelessness Plan, the Real Estate Institute of Australia (REIA) put forward a series of proposals to ease this crisis.
One of these suggestions is to phase out stamp duty.
How eliminating stamp duty can help unlock the market
Stamp duty is an upfront tax levied every time a property changes hands, often amounting to tens of thousands of dollars. This high cost can be a significant financial hurdle for buyers and a deterrent for potential sellers, particularly those looking to downsize.
Eliminating the tax could encourage a more dynamic property market.
For starters, it would lower the upfront costs associated with buying a home, making property purchases more accessible, especially for first-time buyers. It would also encourage homeowners, especially older Australians, to consider downsizing, as the financial burden of moving would be lessened. This would result in larger family homes being released back into the market, addressing part of the supply issue and, potentially, leading to a more efficient use of the existing housing stock.
REIA has called on state and territory governments to:
REIA proposals to help first home buyers
Aside from stamp duty reform, REIA president Hayden Groves said there needed to be a laser-like focus on helping Australians into home ownership.
“Simply saying it’s too hard and ‘let them rent’ is a complete disservice to young Australians,” he said.
“We know home ownership is a hallmark of long-term prosperity and we must tackle this in the Plan.”
To this end, REIA is advocating for the continued roll-out of the Home Guarantee Scheme. This is a federal government scheme designed to help eligible first home buyers purchase a home with as little as a 5% deposit, while avoiding lender’s mortgage insurance.
Additionally, REIA is recommending that first home buyers should be allowed to deduct up to $5,000 per annum on their interest bill. This could lighten the financial load for new homeowners, making the path to ownership a little less steep.
REIA proposals to help ease tight rental markets
Australia’s housing crisis is also impacting the rental market, with a lack of available properties similarly pushing up rental costs.
However, it’s estimated that many homes across Australia sit empty for various reasons, effectively removed from the housing supply.
REIA believes incentivising owners to bring these empty homes back into the rental pool would reduce the market’s tightness.
Moreover, Mr Groves highlighted the need to promote property investment within Australian families, not just superannuation funds.
“Australia’s residential property market is worth $10 trillion compared to superannuation which currently sits at $3 trillion. Our sector currently has residential rental assets under management that are estimated to be $3 trillion, supplied by around 2.2 million Australian family investors,” he said.
“To make the plan effective, we actually need to look at the respective pools of capital and grasp that family investment will be critical in every way in achieving our housing goals by 2034.
“And ask the question: ‘How can we get more family investors into housing over the next ten years rather than less’?”
As such, Mr Grove cautioned against policies that could dissuade these investors, such as removing negative gearing benefits, as this would inadvertently shift the advantage towards larger corporate entities.
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