What does Queensland’s 2011 experience tell us about the costs of stamp duty?

Key takeaways

Stamp duty imposes a cost of moving equivalent to around 5 months of a person’s take-home. Recent survey results also show that it’s deterring people from downsizing, and is an unpopular policy generally

Queensland's 2011 stamp duty hikes led to a significant drop in home purchases, relocations, and cross-state movements, illustrating the broader impact of housing transfer taxes on individuals and the housing market.

Since the mid-90s, stamp duty has tripled relative to incomes.

A 1% increase in stamp duty caused a 2% fall in the volume of home purchases.

Research suggests that removing stamp duty, as seen in other states like NSW, could lead to a substantial increase in home relocations, potentially boosting mobility by 25%.

A recent analysis by the e61 Institute and PropTrack has shed light on the significant impact of Queensland’s 2011 stamp duty hikes.

The numbers are telling: a sharp 7.2% drop in home purchases for that year.

This isn't just about sales figures; it's about people – with a 9% decrease in relocations (equating to 20,000 fewer moves) and a 14% reduction in cross-state movements.

Titled ‘Stepped on by Stamp Duty: The Effect of Housing Transfer Taxes on Home Purchases and People Movement,’ this research builds upon previous studies.

One of its striking conclusions is the potential effect of stamp duty removal.

In NSW, for instance, this could trigger an additional 100,000 moves annually, boosting relocation by 25%.

Dr Nick Garvin, Research Manager at the e61 Institute, provides a unique perspective:

"Queensland's scenario serves as a natural experiment.

They were the lone state to significantly amend stamp duty at that time, allowing us to isolate and understand its distinct impact.

This hike, though politically contentious, had far-reaching effects on both the housing market and the mobility of individuals."

Dr Garvin highlights the Queensland case as a clear illustration of stamp duty’s broader consequences.

“The before-and-after comparison in Queensland starkly demonstrates how stamp duty can lock people in place, hindering them from downsizing or even switching jobs. In an era of slowing productivity and housing challenges, it’s crucial to remove obstacles that impede job and housing mobility", he said.

The research narrates the events leading to Queensland's stamp duty increase.

Announced in a budget speech, the government’s decision to remove concessions on 1 August 2011 prompted a temporary spike in home purchases.

However, following the hike, a noticeable and sustained decline in purchases was observed throughout the year.

A subsequent change in government on 1 July 2012 saw the reinstatement of the occupier concession, with purchase rates reverting to pre-August 2011 levels.

Further, e61 Institute and PropTrack research underscores a dramatic escalation in stamp duty costs over the years.

Today's homebuyers are shouldering a burden roughly five times greater than what was borne a generation ago – an expense equivalent to about five months of take-home pay, even higher in Sydney and Melbourne.

Angus Moore, Senior Economist at PropTrack, points out:

“Today’s stamp duty is a substantial upfront cost. Buyers in Melbourne and Sydney are paying over five times the stamp duty compared to the early 1980s.

This increase is largely due to bracket creep. Most states haven’t updated their stamp duty brackets for decades.

As home prices have soared, more homes now fall into higher tax brackets.

From just 12% of buyers paying a stamp duty rate of 3% or more in the early 1990s, we’re now at 95%."

The research also highlights how housing costs, like stamp duty, influence various personal decisions – from job changes and family planning to downsizing and relocating.

Reflecting on the broader policy implications, Dr Garvin emphasizes the lessons from 2011 and their relevance for current policy discussions, such as those in the ACT.

“Our findings underscore the positive impact of stamp duty removal or replacement, benefiting potential homeowners and the Australian economy. Stamp duty is widely unpopular. Its abolition opens the door to more equitable tax solutions, benefiting those who need or wish to move", he concluded.

Other key findings from the research:

• Since the mid-90s, stamp duty has tripled relative to income
• In August 2011, the Queensland government nearly doubled stamp duty for owner-occupiers
• A 1% increase in stamp duty caused a 2% fall in the volume of home purchases.
• Total Queensland moved dropped by 20,000 in the 2012 financial year
• Stamp duty imposes a cost of moving equivalent to around 5 months of a person’s take-home. Recent survey results also show that it’s deterring people from downsizing, and is an unpopular policy generally
• If NSW removed stamp duty, about 100,000 additional owner-occupiers would move home each year – 25% more than currently move
• The stamp duty rise had a statistically significant effect on moves of all distances in Australia
• In FY2012, the number of people moving dropped by around 9%
• The cross-state movement rate experienced a decline of 14%
• Stamp duty is a very significant upfront cost for homebuyers, and is far higher today than for previous generations of homebuyers.
  • In Sydney, stamp duty on a median-priced home is equivalent to 6 months of full-time post-tax income. That is 5.4 times higher than it was in the early-to-mid 1980s
  • In Melbourne, buyers need the equivalent of 6 months of full-time – a whopping 1-fold increase from four decades ago – the largest increase of any city.
  • It is not just our largest cities: Owner-occupiers in Brisbane pay 5.5 times as much stamp duty, relative to incomes, as in the early Adelaide, Perth, and Hobart have also seen substantial increases in the cost of stamp duty. Stamp duty on a median-priced home is 4.9 times higher, relative to income, in Adelaide. It is 5 times higher in Perth, and 6.7 times higher in Hobart.
• Housing costs are reportedly holding people back from moving homes, downsizing, changing jobs and having children
• The most popular housing policy for state governments is to abolish stamp duty.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.