A recent collaborative study between the e61 Institute and PropTrack has revealed significant findings from Queensland’s stamp duty increase in 2011, showing a notable drop in the volume of home purchases and mobility rates. According to the research, a mere 1% increase in stamp duty led to a 7.2% decrease in the volume of homes purchased, underscoring the steep impact such fiscal policies can have on housing market activities.
In 2011, Queensland experienced a 9% (equivalent to 20,000 moves) decrease in the number of individuals relocating, with interstate movement plummeting by 14%. This data is brought to light in the study ‘Stepped on by stamp duty: The effect of housing transfer taxes on home purchases and people movement,’ extending previous research and drawing crucial lessons from Queensland’s market dynamics.
Dr. Nick Garvin, Research Manager at the e61 Institute, shed light on the uniqueness of Queensland’s situation, stating, “Queensland acts as a natural experiment as they were the only state who made significant changes to stamp duty during this time so we were able to isolate its impact in a unique way.” The stamp duty hike, though politically challenged, demonstrably dampened housing market activity and restricted the mobility of residents.
Further emphasizing the broader implications of stamp duty, Dr. Garvin highlighted, “The before and after in Queensland is a stark example of the impact of stamp duty. We see that stamp duty prevents people from moving and therefore downsizing and possibly even changing jobs. With slowing productivity and problems with housing availability, removing barriers to job and housing mobility is critical.”
The research also revisits the spike in housing purchases leading up to the concession removal announced in a budget speech prior to August 2011, drawing a clear correlation between tax changes and market behavior.
Moreover, the e61 Institute and PropTrack’s prior studies have illustrated how stamp duty has surged approximately five-fold relative to a generation ago, significantly burdening homebuyers with costs nearly equivalent to five months of take-home income, with higher figures in Sydney and Melbourne.
Angus Moore, Senior Economist at PropTrack, shared insights on the evolution of stamp duty, particularly emphasizing the role of bracket creep. “Bracket creep has been an important driver of this increase in stamp duty as most states have the same stamp duty brackets they had decades ago,” Moore explained. This mechanism has ensnared a larger portion of homebuyers in higher tax rates as property values have escalated over time.
Concluding with a perspective on potential policy shifts, the analysis suggests the abolition of stamp duty could trigger a notable increase in housing mobility, potentially catalyzing approximately 100,000 additional moves annually in NSW alone, representing a 25% uptick from current rates.
As different regions contemplate similar reforms, the findings from Queensland’s 2011 stamp duty adjustment offer a cautionary tale and a potential roadmap for enhancing housing market fluidity and economic vitality nationwide.