Stamp duty, rebate reform needed to shift imbalance against apartments
Writing exclusively for API Magazine, CEO of UDIA WA, Tanya Steinbeck argues that stamp duty and rebate schemes that favour houses over apartments are in need of reform.
While the Perth apartment market has moderated in recent years, the demand for apartment living is still growing as young couples, downsizers, and interstate and overseas migrants look for appropriate accommodation.
The interest in the high-density market in Perth is from both owner-occupiers and investors looking to enter the tightly constrained market.
Apartment sales have slowed due to a range of factors, not least a lack of supply due to the limited viability of new projects during extreme worker shortages and material cost escalations, that are limiting the rollover of capital to allow developers to commence new projects.
Given that new apartment projects are potentially being shelved due to the challenges associated with getting them to market, UDIA WA has written to WA State Treasurer and Premier Mark McGowan with a recommendation to help boost buyers’ ability to purchase apartments and offset construction cost pressures.
Since its establishment in 2019, the Off-the-Plan (OTP) Duty Rebate scheme has helped to promote investment in the WA residential apartment market while also stimulating jobs in the construction industry, by providing a rebate of duty paid on eligible unit or apartment purchases.
The rebate is only available to owner-occupiers and investors who enter into a pre-construction contract up until 24 October 2023 (inclusive) to purchase a new residential unit or apartment.
UDIA WA’s recent letter to the Treasurer has requested a permanent extension of the OTP Duty Rebate Scheme (the Scheme).
The letter notes that with increases in apartment values not keeping up with sustained increased construction costs, the Scheme is vital in supporting housing supply at a time when it is most needed.
Further, by reducing the disparity in the amount of transfer duty payable between apartment projects and house and land packages, the Scheme is assisting the delivery of the Government’s infill development aspirations, adding greater housing choice and increasing the vibrancy of Perth suburbs.
Expansion to build phase
Along with a permanent extension of the Scheme, UDIA WA is also seeking an expansion of the Scheme to include projects that are already under construction.
The expansion of the Scheme to projects under construction will not only benefit buyers, but it will also allow developers to complete sales more readily, in turn allowing capital to be recycled into new projects more quickly. That is much needed capital to allow developers to add further to housing supply.
UDIA WA has run the numbers and since the rebate was established in October 2019, based on Urbis Apartments Essentials data, the scheme has supported the sale of 3,866 apartments in Perth with a total sales value of $2.79 billion.
Using the National Housing Finance and Investment Corporation (NHFIC) residential construction activity multiplier, the rebate has supported 25,094 jobs across the three years of its operation.
Unfair imbalance
At the moment, in Western Australia, the way stamp duty is calculated for new houses and new apartments, it is skewed toward the purchase of new houses.
A buyer purchasing a new house and land package only pays stamp duty on the value of the land component. New apartment buyers pay stamp duty on the land and apartment value combined. This has an impact on the relative affordability of a new apartment versus a new house.
At the end of the day, it is no secret that WA, like most states in Australia and indeed cities around the world, is in dire need of more housing supply in a diverse range of areas and diverse product to suit different household needs, budgets and demographics.
When we consider the high-end apartment market in particular, this product is especially attractive to downsizers who want to find a smaller home within their local area.
Encouraging them to move, by being able to access the Scheme, means they are freeing up larger homes for other families.
The Scheme also provides scope to deliver more affordable product to the market, as buyers at the lower end can access the rebate and that should assist with their budget.
It is important that we support the apartment market and ensure that buyers can purchase the housing that suits their needs, and for a growing segment, which is a well located, well priced apartment.
