The impact of rocketing stamp duty is starting to bite into Melbourne’s property market as an increasing number of homeowners opt to renovate rather than move.
Stamp duty in Melbourne has been soaring during recent boom property years because the rate structure that calculates it has barely changed while house prices have been rocketing upwards.
Stamp duty for a median-priced house in Melbourne is now nearly $50,000 and 20 years ago it was a fraction of that.
The big jump in the stamp duty impost is restricting many people from moving for better work opportunities and families from moving to new homes that better suit their needs and is copping increasing criticism.
It is also driving more homeowners to choose to renovate instead of selling and moving elsewhere. Westpac say that last month their research showed a 14 per cent rise in Australian homeowners planning to renovate their homes while those planning to buy or sell dropped.
BDO national tax director Lance Cunningham discussed the tax barrier to Domain.
“We talk about bracket creep with income tax but this is the biggest bracket creep you could ever see,” he said.
“The State Governments have just been sitting there watching the house prices and stamp duty go up.”
“There’s no real economic rationale as to why you would have a stamp duty just on the basis of somebody moving.”
The Housing Industry Association expects renovations around Australia to keep growing well into 2020 and 2021.
ME Bank’s Patrick Nolan told Domain there was a definite trend toward home renovations.
“We’ve seen a substantial increase in renovation loan applications in 2017, a trend that we’re likely to see well into 2018, as households choose to renovate over moving,” he said.
“We’re also seeing some more top-ups as people take advantage of lower interest rates and leverage the extra equity in their property to finance renovations.”