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Rising property prices in Sydney and Melbourne is not the only obstacle preventing people from entering the market, according to CoreLogic RP Data. Another factor contributing to the high entry cost is stamp duty.
CoreLogic said in its recently released Property Pulse for December that stamp duty varies “remarkably” in each state and territory, based on the price of the property, the type of buyer and the type of property.
Calculating how much stamp duty costs can be confusing, CoreLogic head of research, Tim Lawless, said.
“[This is] due to the significant differences regionally, but also due to the complexity of rules, concessions and limits that are applied to the calculation of stamp duty.”
Based on the median dwelling value in each capital city, stamp duty estimates can range from nearly $33,000 in Melbourne to a modest $9,000 in Brisbane.
“Even though the median dwelling value is higher in Sydney, compared with Melbourne, the cost of stamp duty on the median valued home is actually slightly lower in Sydney, due to higher stamp duty rates in Victoria,” Mr Lawless said.
In some states, first home buyers are given substantial concessions on stamp duty. However, there is generally an upper limit. Stamp duty can also be higher for investors.
Surprisingly, New South Wales – the state with the largest proportion of investors – does not charge a premium rate of stamp duty on this segment of the market.
That said, the three largest states do charge a stamp duty premium on property purchasers by foreign buyers.
“Because stamp duty costs are percentage based, as dwelling values move higher, stamp duty costs can rise disproportionately faster due to bracket creep,” Mr Lawless said.
“Over the past five years, dwelling values in [Sydney and Melbourne] have increased, which implies at least a commensurate rise in stamp duty costs in these cities.
“The high transactional costs associated with housing are likely to be one factor that is contributing to a slowdown in the number of sales across the country.”
While stamp duty is generally the largest transactional cost associated with buying, there are other costs such as building and pest inspections, conveyancing and removalists.
“Add to this the fact that most lenders will be seeking a 20 per cent deposit and the barriers to entry become even more substantial,” Mr Lawless said.
