There’s been a cacophony of opinion this week filling column inches and taking up the airwaves of property centric media.
Refreshingly, the massive information wasn’t pandemic associated.
Nor did it contain a concession speech of any description.
No, the chatter has been dominated by a NSW authorities dialogue across the abolition of stamp duty which is a thorn within the aspect of property house owners.
Given there was an expectation stamp duty can be considerably curtailed – if not abolished all collectively – within the wake of the GST’s applied in 2000, this new proposal has been a very long time coming.
There seems to be a lot dancing and rejoicing in regards to the plan – nicely, awkward dad-dancing and restrained accountant-style rejoicing anyway – however as is usually the case, we now have valuable little tremendous element on the proposal at current.
As such, making an attempt to foretell the precise fallout of this transformation is troublesome.
However I’ve by no means been one to draw back from a problem – significantly in terms of tax issues.
It’s my terribly boring superpower.
Right here’s a abstract of the proposal and my three long-range predicted outcomes ought to the modifications come to cross.
This might imply purchasers might select an ongoing yearly land tax fee slightly than a lump sum stamp duty which, by the best way, is simply over $42,000 based mostly on the median Sydney home value at current.
In line with media experiences, as a result of there’s been far much less market exercise this yr (as a result of some international pandemic or one thing) the income generated from stamp duty has fallen dramatically.
As such, now’s a major time to implement the modifications.
Not solely would a restructure be much less painful proper now, however authorities has grown extra accustomed to decrease stamp duty.
However it’s not all altruism on the state’s half.
A 2019 Grattan Institute examine on the abolition of stamp duty said:
“…shifting from stamp duties to a broad-based property tax might go away NSW between $4.1 billion and $5.2 billion a yr higher off.”
Looks as if a win for everybody at this stage
My three predictions
Let me say from the outset, particulars in regards to the proposal are nonetheless a bit mild on, however let’s assume the protocols will proceed to be usually according to the data we now have handy.
These property will probably be extra value accessible, particularly for first homebuyers and buyers.
If consumers are selecting between a transaction with an enormous up-front price, and one with extra manageable ongoing price, then the latter goes to come back up trumps in most situations.
The results of larger demand is (all issues being equal) larger costs too, so count on to see land-tax properties fetch greater than their stamp-duty contemporaries.
Prediction two. Be ready for a possible two-tiered market divided alongside property worth strains in the event that they don’t change the best way land tax is labored out in the intervening time.
Annual land tax is presently assessed on the premise a property proprietor’s holdings exceeding a threshold of $755,000 in taxable land worth.
Whereas particulars are but to emerge on what thresholds will probably be in place below a brand new system, if the established order of land tax thresholds have been maintained, those that sit beneath the determine are unlikely to undertake the ‘pay upfront stamp duty’ possibility.
I’ve one massive caveat although.
Governments have a historical past of discovering methods to get their pound of flesh.
I don’t actually consider they’d introduce a scheme that gives a loophole for avoiding tax altogether, so count on a flat proportion or sliding scale of some description to make sure the cash retains flowing into consolidated income.
My third name is a little more strong.
I feel 2022 may very well be ‘The yr of the NSW flipper’ below the modifications.
Shopping for a dodgy property, doing a fast repair up and on promoting for a revenue was extraordinarily standard a decade or so in the past.
Within the ensuing years – nationwide financial challenges apart – it appeared each lady and her canine needed to offer flipping a go, so competitors for renovatable property heated up.
However an enormous a part of making a flipping revenue is preserving prices down, and stamp duty has been a monstrous drag on the underside line of renovation initiatives.
The removing of stamp duty would assist make flipping extra worthwhile.
There are wider movement on advantages from this prediction as nicely.
Past merely the property proprietor’s monetary achieve, there’s the broader financial upside with elevated use of consultants, contractors and supplies.
Flipping is a superb stimulus for the true property sector, so let’s hope I’ve nailed that one like Nostradamus on a very good day.
So, I say ‘hurrah!’ to the proposed modifications however I stay up for seeing the nitty gritty instil extra confidence into an business that’s the financial basis of this nation.