One observation – and I have been growing more concerned about this in recent years – is a situation that, I suspect, is about to become more ‘acute’ and have a significant impact on our client’s real estate transactions in future years.
I refer to the ever-increasing grab of cash that the state government takes when its citizens move house – stamp duty and the recently introduced ‘Torrens Assurance Levy’.
Consider stamp duty first. This is applied at a rate that starts at 1.25% (for the first $14,000) and increments up to a rate of 7% – as the property value increases! When these rates were set many decades ago it was possible to buy an average home in Sydney for much less than $150,000. That same average home today would cost in excess of $600,000 and is predicted to be in excess of $1,250,000 within another 8 years! That will come soon enough, given the fresh memory of the new millennium 11 years ago.
The stamp duty on a typical property in 1970 would have been $3,408 (2.43% of its value) while in the current year it is $23,188 (3.77%). In 2019 it will be a whopping $56,127 (4.38%).
I re-iterate that we are still referring to an ‘average’ house in Sydney – not prestige property. Nor are we referring to wealthy land owners! Many ‘average’ Sydney homeowners would be used to paying prices well in excess of these amounts.
On top of these stamp duty charges the NSW government recently introduced an additional new charge the ‘Torrens Assurance Levy’. This is an additional fee charged upon registration of a transfer of property.
The rationale for this new impost is to pay for claims, the government states, that are being made with regard to fraudulent use of titles to property and the implementation of enhanced security measures in Certificates of Title.
However, there has always been a charge of $4.00 for every transfer lodged for registration. For decades, this has been more than adequate to cover any such claims. The NSW government did not produce any data on the state of this fund and any pending claims. I suspect the fund has a healthy balance!
As to ‘the enhanced security measures’ on Certificates of Title – these measures were introduced many years ago and financed, at that time, by a doubling of the registration fee (another $90.00). No-one had an issue with the increase at that time.
The justification (and, indeed, the name of the cash grab) now being made by the NSW government for this levy is nothing short of a lie. It is simply a grab for extra cash from home buyers.
The NSW opposition promised, at the time the charge was introduced, to remove the levy should it be elected in March 2011. Let’s hope this promise is not conveniently forgotten!
As noted earlier I observed an increasing client unease with respect to these imposts by government. I feel that we are now closing in on a ‘tipping point’ – where these charges will be a genuine disincentive to families moving house (whether it be upgrading to something bigger to accommodate a growing family or retirees downsizing).
The root of this problem is the insidious concept of bracket creep – where a scale is set when property values are low but providing for automatic increasing percentage amounts as property values escalates. Nobody notices at the beginning with small increments annually – but, eventually, it becomes painfully obvious that the imposts have become quite draconian. Are we near that point?
I firmly believe it is now time to for the government (whoever it may be after 26 March 2011) to have a serious look at the structure of the stamp duty tables – with a view to ‘flattening’ the rates applied to each bracket of property value – and regularly indexing those scales.
An average home buyer in NSW should be paying no more than 3% in stamp duty. This is the rate applied just 10 years ago! In a short 10 years it is now approaching 4%. The goose has no more golden eggs left!
Until next time
Richard
source : Paul Denny
