Published on January 11th, 2013
Stamp duty reforms aid real estate, experts say
Reductions in the rate of stamp duty are seriously needed to aid in the recovery of the residential property sector, a study of mortgage brokers has found.
Loan Market asked industry experts what they believe is the key to turning around the industry with respondents overwhelmingly naming stamp duty reform as an impetus for change.
The mortgage brokering business surveyed its staff of 450 brokers and asked 'what action can the government take to stimulate the housing market in 2013?', with 55 per cent of respondents nominating the tax alteration.
Corporate spokesperson with Loan Market Paul Smith said that while stamp duty is a good source of revenue for government budgets, it erodes too much of homebuyers' bank accounts.
He commented: "What stamp duty often does to consumers is reduce their deposit level so that they end up in Lenders Mortgage Insurance [LMI] territory and have to pay an additional cost to establish the loan."
It should be noted that LMI is insurance charged by the lender and paid for by the borrower to insure against a default on the loan.
Mr Smith added that many lenders don't actually charge the insurance if a buyer has 20 per cent of the property price, but stamp duty can cause severe reductions in deposit totals.
There are concessions to these taxes from different states for many eligible parties, including first home buyers, Mr Smith mentioned, but for those who don't qualify, they miss out.
The spokesperson went on to say that cuts to interest rates aren't having the positive effects on the housing sector that they once did. As a result, he argued that state governments should be looking at their own specific alterations to stamp duty.
In order to ensure that buyers reap the most rewards, Mr Smith said they should keep up to date on government conversation in regard to any reform.
He concluded: "If you act at the right time, you can save a significant amount of money that can allow you to pay your home off faster."