Rising taxes, not low supply, seen as key driver of affordability crunch
Australia’s housing affordability crisis is being fuelled by rising property taxes rather than supply shortages, according to one property industry figure.
James Limnios (pictured above), managing director of the Limnios Property Group, pointed to new data from the Australian Bureau of Statistics (ABS), which revealed that property taxes collected by state and local governments have jumped by $20 billion in the past decade, reaching a total of $45.1 billion—a rise of 80%.
“And these taxation figures produced do not include the huge amounts of indirect taxation income the federal government obtains from the property market through GST,” Limnios said.
“We have a housing crisis because we have a taxation crisis in the property market which is preventing much-needed new housing from entering the property market at a time of surging demand for homes.”
Limnios argued that the market faces even greater pressure, with both major political parties unveiling housing policies ahead of the election that are expected to further drive demand.
The Labor Party has proposed a scheme allowing first-home buyers to purchase with a 5% deposit without lenders mortgage insurance, while the Coalition is offering to make interest payments tax-deductible on the first $650,000 of a mortgage for eligible buyers.
However, despite a recent interest rate reduction and campaign pledges to assist first-home buyers, average wage earners still cannot afford the median home price in many major cities, according to financial comparison site Canstar.
“Instead of focusing on further increasing demand for housing, we need to help fix the supply side by reducing taxes on property, especially for smaller property developers,” Limnios said. “Housing supply is being crippled by the fact that half the cost of building a new house in some parts of Australia is made up of property taxes.”
A Housing Industry Association (HIA) report supports these claims, finding that taxes, regulatory costs and infrastructure charges add up to $237,000 — over one-third of the total cost — of a new house-and-land package in Perth.
HIA chief economist Tim Reardon said that government taxes were undermining efforts to increase housing supply.
“It is incongruous that governments set home building targets, while at the same time tax new home building even more,” he said. “If governments were keen to solve the affordability problem, they need to look at the tax they are imposing on new housing.”
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