Taxes and red tape make up half the price of new homes

Taxes and red tape comprise half the cost of new house-and-land packages, according to research from the Centre for International Economics commissioned by the Housing Industry Association (HIA).    

The research found that 10% of government revenues come from housing taxes. According to the HIA, prices can reach as high as 50% of a house-and-land package in Sydney, 37% in Melbourne, and around 33% in Brisbane, Perth, and Adelaide.

Federal Housing Minister Michael Sukkar told Hotspotting.com.au that the red tape and tax incurred in the construction of a 'house and land' package as a percentage of the purchase price in Sydney and Melbourne is “unacceptable.”

"It is also unacceptable that the supply of new housing is so badly constrained by state and territory planning and regulatory bottlenecks," he said.

For HIA executive director NSW David Bare, the tax duties on housing have “constrained housing supply and driven escalating house prices.”

“Over the ten years it takes to produce a house and land package there is a long and cascading list of red tape and taxes that account for half of the cost of the new house and land package in Sydney,” Bare told Hotspotting.com.au.

“Housing is one of the most heavily taxed sectors of the economy alongside the 'vice taxes' applied to cigarettes and alcohol.”

When combined, government imposts – which include stamp duty on the land and house, GST, income and company taxes – could reach nearly $180,000 from a typical new house-and-land package.  

“This does not include the additional $40,000 in development charges or the $220,000 incurred in red tape,” Bare said.

“Soil testing, native vegetation protection, contamination reports, heritage assessments, bushfire assessments, road access fees, traffic management fees, site inspection fees, building levies, connection fees, energy reports and flood assessments are just some of the cascading costs and delays that push up building costs.”

The Property Council of Australia has impelled the State Government to review stamp duty as new analysis shows Melbournians would need to save on average for 13 years just to cover stamp duty costs.  

With the average Australian saving around 6% of their total income, rising stamp duty is making it increasingly challenging for buyers to move into a new house or upsize. 

According to Cressida Wall, Victorian Executive Director of the Property Council of Australia, the problem for Victorians is that while stamp duty brackets haven’t been reviewed for more than 10 years, house prices have continued to soar, significantly increasing tax rate.

“Stamp duty has increased by 17.9% as a percentage of yearly income in the last 5 years,” Wall told Hotspotting.com.au.  

“This means the average Melbournian now has to pay, on average, an additional nine weeks of salary to cover the inflating cost of stamp duty.”