Australian Property News

Dumping of stamp duty concession could result in higher rents

Posted on Thursday, June 23 2011 at 10:10 AM

While the dumping of Tasmania's stamp duty concession is another nail in the coffin for housing affordability, it might possibly result in a silver lining for landlords, according to Damien Taplin of TPC Valuers.

The Tasmanian Government's recent canning of up to $4000 in stamp duty concessions for first homebuyers will see them staying in rentals longer and place further upward pressure on rental prices, said Taplin.

He said prior to the government's abolishment of the stamp duty concession first homebuyers were already concerned about employment security and lenders were starting to tighten up on their risk in lending to this sector as a result.

"The banks were already saying 'we have enough loans and risk with the first homebuyer bracket' and so that bracket of properties was already becoming flat," said Taplin.

"Now this is one more reason for first homebuyers to stay put rather than enter the marketplace."

As a result of the even tighter vacancy rates, Taplin said tenants should expect a significant rent rise at the next lease renewal due to even tighter vacancy rates.

Real Estate Institute of Tasmania president Adrian Kelly said while theoretically the rents should be pushed upward as a result of the increased rental demand, the vacancy rate is already extremely tight and with employment security a concern in the state, the rent increase might not be as significant as one would expect, unless landlords are squeezed further with interest rate rises.

He said it's taken a lot of work to get first homebuyers back into the market and they had bounced back in the recent month.

"However this announcement has happened just as we're being hit by the GFC (global financial crisis) – two years after everywhere else around the nation – and we’re at the bottom of our property cycle," said Taplin.

"We received no consultation whatsoever so we were very surprised when the government announced the change.

"If we were consulted we would've suggested to at least have left the stamp duty concession in for another 12 months or even just six months to stimulate the market a little and get a little mileage out of it."

Kelly said this change won't only be a detriment to the entry-level housing sector but will create a spiral effect up the housing chain.

"When a first homebuyer buys a property this pushes someone else to upgrade and then another to upgrade further. Without the activity at the bottom of the market the entire market will be impacted," he said.

He said the government receives one third of its revenue through stamp duty and land tax but what it’s now doing is "cutting off its nose to spite its face" because by axing the concessions it's wiping out the potential for stamp duty revenue from right across the property market.

Kelly said the Opposition is yet to deliver its Budget reply, however he expects the decision to can the incentive won’t be reversed.