Government taxes make up one third of Victorian home buyer costs

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on July 27, 2020
Government taxes make up one third of Victorian home buyer costs

Photo by Kon Karampelas on Unsplash

Victorian home buyers are handing up to a third of the purchase price of a new home to the government, a new report reveals.

Between 19-34% of the purchase price of a home in Victoria goes to government taxes and charges, according to a study released today by the Urban Development Institute of Australia (UDIA).

UDIA Victoria CEO, Danni Hunter said the research exposes how much Commonwealth, State and Local Government taxes, charges and levies contribute to the cost of new housing in Victoria.

“We’ve found that government charges can amount to over a whopping one-third of the purchase price of a new home or block of land in Victoria,” Hunter said.

“The large up-front cost then sits in the homebuyer’s mortgage, accumulating interest which adds even more to the amount they pay."

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Lender

Variable
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UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
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AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

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  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 24, 2022. View disclaimer.

The government taxes and charges included in the study are stamp duty, developer land tax, GST, foreign buyer surcharge on stamp duty, developer council rates, infrastructure contributions, growth area infrastructure contribution, open space levy, metropolitan planning levy and statutory utility charges.

A first home buyer purchasing a block of land for $200,000 would hand over $62,480 plus interest, or about 29% of the purchase price to government taxes and charges.

A couple with two kids buying a $315,000 block of land would hand over $106,314 plus interest, or about 34% of the purchase price in government charges.

A retired downsizer buying an off the plan apartment for $685,000 can expect to hand over $131,765 or 19% of the purchase price. 

The report also found that foreign buyers pay about 40% more on government taxes and charges. 

Ms Hunter said the report, the Hidden Cost of Housing debunks the theory that house prices are high because of developers. 

“The cost of government charges is significantly higher than the developer’s profit – a finding that disproves the view that home prices are high because developer profit margins are high, and shows that the developer cannot absorb all those taxes and charges either," Hunter said. 

Ms Hunter said home buyers need to be aware of these government costs.

“Homebuyers make an important contribution to city-building, vital infrastructure and amenities through government taxes and charges," Hunter said.

"But there is a cost to the high rate of government taxes and charges, and it’s important that homebuyers are informed about these costs and that government is held accountable for how they are spent and if they increase."

The report calls for a moratorium on new taxes and charges, tax reform, and a different approach to cutting planning and development approval red tape.

“We need targeted tax adjustments. Lower taxes would increase the volume of new home sales, which would ultimately achieve the same tax revenue for government, while making housing more affordable for Victorians.

“We must get real about the high cost of housing in this state. Every Victorian deserves suitable housing, which is affordable relative to their income. It is incumbent on the government to make housing affordable."


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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