Taxes Push Up the Cost of Housing: UDIA
The government gets more money from every new home built than developers according to research by development industry body the Urban Development Institute of Australia.
The Hidden Cost of Housing report showed developers' profits were less than taxes and charges which equalled up to one-third of new homebuyer costs; 19 per cent to 34 per cent of the purchase price of a block of land or new dwelling, while foreign buyers paid even more.
In order to stimulate transactions and address housing affordability the Victorian branch of the UDIA has proposed a change in the tax mix, a moratorium on new taxes and charges and plans for future growth.
Calls for a change in land and home taxes has been widely called for across the country with Queensland introducing and subsequently withdrawing a new tax late last year.
In the past month New South Wales has also proposed a change in taxes to improve liquidity of the residential market and stabilise the state budget.
Taxes and charges on developers and buyers
| Buyer | Developer Costs | Developer taxes and charges | Buyer taxes and charges | Land/Dwelling purchase price |
|---|---|---|---|---|
| First Home Buyer | $149,500 | $43,210 | $19,271 | $211,980 |
| Couple FHB | $211,025 | $65,364 | $27,639 | $304,028 |
| Single not FHB | $556,543 | $36,570 | $95,195 | $688,307 |
| Couple not FHB | $556,543 | $36,570 | $147,388 | $740,501 |
| Upper quartile buyer | $1,121,250 | $102,999 | $196,492 | $1,420,74` |
| Foreign lower quartile buyer | $149,500 | $43,210 | $42,414 | $235,124 |
| Foreign middle quartiles buyer | $556,54343 | $36,570 | $147,388 | $740,501 |
| Upper quartile foreign buyer | $1,121,250 | $102,999 | $304,226 | $1,528,474 |
^Source: Victorian Division Urban Development Institute of Australia
UDIA Victoria chief executive Danni Hunter said there was a high cost of housing in this state which was ultimately making housing less affordable.
“The cost of government charges is significantly higher than the developer’s profit,” Hunter said.
“A finding that disproves the view that home prices are high because developer profit margins are high, and shows that the developer cannot absorb all those taxes and charges either.
“We need targeted tax adjustments. Lower taxes would increase the volume of new home sales, which would ultimately achieve the same tax revenue for government, while making housing more affordable for Victorians.”
Hunter said this large up-front cost to buyers then sat in their mortgage, accumulating interest which added even more to the amount they pay.
“Homebuyers make an important contribution to city-building, vital infrastructure and amenities through government taxes and charges,” Hunter said.
“But there is a cost to the high rate of government taxes and charges, and it’s important that homebuyers are informed about these costs and that government is held accountable for how they are spent and if they increase.”
