Will home buyers have an interest in paying stamp duty or property tax?

Once a property has been converted to the property tax system, all future owners would have to pay tax instead of stamp duty. Former buyers would not be affected by the changes.

The wealthiest 20% of residential properties in NSW would not be eligible for buyers to opt for property tax and would continue to attract stamp duty, as previously reported by Sydney morning Herald. The 80th percentile for all NSW housing was $1.54 million in the March quarter, according to domain data.

Powell said the state government should also seek to adjust stamp duty rate bands, which were tied to movements in the consumer price index. As property price growth had soared well above this, more NSW buyers were now paying higher stamp duty rates.

The median house price in Sydney has risen 280% over the past 20 years, from around $418,000 to around $1.59 million, while the cost of stamp duty on that median priced house has jumped 406% to nearly $72,400 from around $14,300.

Housing policy expert Dr Chris Martin, senior research fellow at UNSW’s City Futures Research Centre, said the stamp duty may discourage people from making moves that would otherwise be beneficial, but was not an obstacle as important as claimed.


Although the stamp duty was paid by the buyer, evidence shows that it stems from the price received by the seller, Martin said. He worried that any upfront cost savings would be added to the buyer’s spending budget, ultimately resulting in more money for sellers and putting upward pressure on prices.

A property tax could put underutilized land on the market and encourage owners to move more frequently, which he argued. However, he said he was concerned that lower upfront costs for investors would lead to more speculation and churn from the rental market, and he would prefer to see the property tax limited to homeowners.

“Having a stamp duty puts some grain in the transaction wheel, which could actually be a good thing…like an anti-rollover tax,” he said.

Sydney buyer’s agent Peter Kelaher, managing director of PK Property, said stamp duty had reached outrageous levels as soaring prices pushed more properties into the upper band of duty. This weighed on buyers’ decisions and could influence the length of time owners held a property.

Kelaher said a property tax would allow for more transactions, but felt that for many buyers the upfront cost would still be preferable to an additional annual outlay. He also said choosing whichever becomes the less popular of the two options could hurt future sellers during the transition phase.

“If you picked the product that’s unpopular in a certain suburb, your home won’t be as appealing,” Kelaher said.

Penny D. Jackson