Article by James Limnios, courtesy of The West Australian
With the Federal election now in full swing, it is timely to raise the question of why Australia is now becoming one of the least affordable places in the world to own a home and its connection to the spiralling government taxes on property.
Other than alcohol and cigarettes, which are subject to so-called “sin taxes” for the purpose of public health, housing is the most taxed sector in the country.
That is why we need to urge our politicians to take a fresh approach to dealing with this barrier to home ownership throughout Australia by making a commitment to slash government taxes on property.
After working in the property sector all my adult life, I have noticed a fundamental change in our society that is now challenging this long-held view that Australia is the lucky country.
That change is housing affordability. Or, more precisely, the lack of affordable housing.
This major social issue is underlined in the Dermographia International Housing Affordability report, published last year. The report analysed 94 major housing markets in metropolitan areas across eight nations — Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the US.
It used a methodology called a “median multiple” — the median house price divided by the pre-tax median household income — to rate housing affordability.
The report found that Australia accounted for three of the top 10 least affordable housing market cities in the world — Sydney, Melbourne, and Adelaide.
This report was published before the huge break out in Perth property over the last year that saw house prices jump by more than 20 per cent to $760,000. And they’re continuing to climb.
Based on these current trends, it will not be long before Perth joins Adelaide, Melbourne and Sydney in the list of the world’s most unaffordable places to buy a home.
Another simpler way of measuring the long-term trend of affordable housing is to compare the price of a family car in Perth back in 1980 to the price of a house.
Forty-five years ago, the median price of a house in Perth was $41,000 compared to $8000 for an average family car — a fivefold difference.
Today, a base model Toyota RAV4 will cost you $42,000, meaning you’d have to buy 18 of them to spend the same as you would on the median priced home.
There are many reasons for this growing unaffordability of housing in Australia, but one of the key reasons is due to government taxes on housing.
The fact is that housing is increasingly being used as a cash cow by all levels of government in Australia to pay for the burgeoning growth in bureaucracy that did not exist a generation ago.
One prime example is the cost of building a home now. I have been in the real estate sector for all my working life, and it even shocked me to read that government taxes account for up to half the cost of building a new house.
The figures contained in a new Housing Industry Association report give a view of the taxes, fees, and charges on new housing and apartments.
It found that up to $576,000 — or almost half — of the cost of a new house and land package in Sydney is government taxes, regulatory costs and infrastructure charges, while the value of taxes and charges in Sydney has increased by 38 per cent, or $160,000, compared to the 2019 report.
The figures for government taxes and charges are as bad for Perth, with the report showing government taxes, fees, and charges account for a massive $237,000 on a house and land package in the city, while for apartments it is $149,000.
Property owners are not only paying massive government charges just to buy a home but also to hold a property over the long term.
In WA, property taxes now account for one quarter of the State’s tax revenue.
These taxes on property include transfer duty, which is now the State’s second largest tax after payroll tax.
At the same time, local governments too readily increase their rates for property owners well above the CPI while at the same time punishing property developers with numerous nuisance taxes such as public art charges.
This cascade of property charges and taxes across all three levels of government is making the Australian dream of owning a home harder to achieve for a growing number of our citizens.
That is why we need to urgently cut government taxes and charges on property to make housing more affordable in this country.
Ever rising property taxes is killing the home ownership dream in Australia.
It is time for all the major political parties to act on this key issue if they are serious about ending the housing crisis in Australia.
James Limnios is the managing director of Limnios Property Group
