Lance Williams has a problem. He owns a three-bedroom house in Sydney’s west, the kind sought after by young families in a more-affordable suburb.
But he doesn’t want to live there anymore.
Fed up with the bright lights of the busy suburb, the amateur backyard astronomer figured he would kill two birds with one stone by moving to the NSW south coast.
He would like a quiet life and a sky full of stars, while making way for a family to raise their kids under the same roof he reared his son and daughter.
But for Mr Williams, having to pay stamp duty on a new house is stopping him from selling up.
“I find it unbelievable that I have to pay the government to put a stamp on a piece of paper, just so they can make $30-$40,000 off this, and then I have to worry about the costs of removals,” he said.
“The amount of money that you’re going to have to spend, well as a pensioner, that’s probably a year, maybe two years’ worth of income.”
Mr Williams is worried any additional cash released by moving into a smaller property will be eaten up by stamp duty and moving costs instead of being added to his retirement pot.
“Whatever I was going to make out of the house, simply to move, I’m going to lose at least 10 per cent,” the Shalvey resident said.
“If they really want to free up these homes, then they have to give a stamp duty exemption for retirees.”
‘Affordability benefits’ overlooked
Nick Garvin from the economic research institute e61 agreed, and suggested stamp duty reform could encourage downsizing.
According to research conducted by Dr Garvin and his team, “stamp duty is deterring close to a quarter of potential downsizers”.
It analysed the impacts of Queensland’s stamp duty rate rise on owner-occupiers when the rates increased by one percentage point from the average of 1.26 per cent of to 2.27 per cent of the purchase price.
They found a 1 per cent increase in stamp duty causes home purchases to drop by 7.2 per cent.
By extrapolating that data, Dr Garvin said if stamp duty in NSW at the average rate of 3.5 per cent was scrapped, we could see an estimated 100,000 more moves by owners — an increase of 25 per cent.
A problem with stamp duty, according to Dr Garvin, is that it rises with house prices, causing a double burden for already-squeezed buyers in the current market.
“One payment of stamp duty is now around five times what it was about a generation ago,” he said.
A report by e61 found “typical stamp duty payments cost around five months of take-home income” — doubling since the 2000s.
While Dr Garvin believes stamp duty should be removed for “everybody,” he says targeted exclusions for older downsizers “benefits everyone else as well”.
“Often, downsizers are moving from areas in which the housing supply is a bit short, relative to demand,” he said.
“So freeing up that housing supply in the high demand area has affordability benefits for everybody else.”
‘Everyone hates paying tax’
For Mr Williams’ south coast dream property — with the average price being $572,000 according to CoreLogic data, he could expect to part with $21,139 in stamp duty as a non-first home buyer.
But removing it, even for retirees, “would be an issue for state governments” conceded Dr Garvin.
“Stamp duty is currently around a quarter of state government revenue … they would seek to get that revenue back elsewhere, maybe through other taxes.”
Other governments including Victoria and the ACT have stamp duty exemptions for some pensioners moving into properties worth less than $750,000 and $1,000,000 respectively.
Economist and author Dr Cameron Murray rejects the idea that stamp duty exemptions would free up housing by encouraging downsizers to move.
“Everyone hates paying tax,” he said.
“For a lot of people it would be comical to say, ‘We don’t want to pay $30,000 to buy a million dollar property’ … everyone is going to laugh.”
He said there might be a “once-off” increase in people downsizing if stamp duty exemptions were introduced, but that over time it would have little effect, because everyone downsizes eventually.
According to Dr Murray, pensioners who are already exempt from the capital gains tax on the home they live in means “it’s not like the system is unfavourable to home ownership”.
But Dr Garvin said even if removing stamp duty only causes a once-off effect “it could be sizeable”, and ignoring the loss of revenue, “there’s little cost to implementing the policy”.
Mr Williams is worried about managing a property with a garden like his in Western Sydney, but fears with property prices rising in the regions, the benefits of uprooting himself and his wife are shrinking.
“If you move somewhere and you’re buying something of the same value, why should you have to pay again? I can’t understand,” he said.
“If they want to reclaim stamp duty when the people have sold it or have died, well fine that’s up to them.”
Another baby boomer who has had freebies all his life complaining about having to pay a little tax. He should count himself lucky he doesn’t have to pay CGT, and all the other free kicks boomers have had all their lives.
There should be no exemption for baby boomers buying a replacement property. The rules should apply to everyone equally.
Having said that, I can see an argument for replacing all stamp duty with an annual land tax instead. But the rules should apply to all property owners, without exemptions.
Stamp duty is an issue that has been talked about in every state for years now, and as you pointed out the cost is quite exceptional. The idea of reducing or getting rid of stamp duty to assist such housing movements has been put to most state governments many times, but with little recognition or gof resolving the larger housing problem, Add to that the use of real estate agents in mo9st situations also wanting their piece of the pie and the current high cost of many three bed homes being almost as much as larger homes, it is no wonder retirees are staying put, apart from having established social networks, critical services and medical centres in close proximity and relationships established the all in all cost leaves you significantly out of pocket in the long ter. Then there’s the potential to require solar, battery and the now almost necessary blackout protection, (renewables wont stop blackouts), cctv, water tanks, etc and one can easily see the costs keep mounting up. (Suggest all costings in region of $60-80K). And let’s not forget, although the politicians love to forget, this type of state tax was supposed to have been done away with when John Howard brought in the GST. But no one wants to admit that any more aparet from blaming him for GST.
We have a 100 acre rural property and have considered selling up and moving into a warmer coastal location. As a partly self-funded retiree and dependent upon a part pension to some extent, I am financially worse off than several years ago as my income barely increases while costs go up far more. On researching places with a small piece of land, eg 1200 square metres up to 4 or 5 hectares and a variety of houses on them, we were shocked to see how much money we’d be forking out in the exchange. Stamp Duty was going to be just over $45000 on the place we’d really like. Added to that would be the legal fees at both ends plus search fees at the buying end, real estate agents fees at this end, inspections and removals fees at the other end. Whatever we sell our home here for, we’ll only be able to buy something substantially less than what we have here. It seems like we’ll have to stay put. The stamp duty is the major component of the change of location. This is the same problem that each and every person in the state faces when moving. In so many instances, home owners are actually worse off as property values increase as a greater amount is chewed up by stamp duty and all the other percentage based fees.