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."
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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%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
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."
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
- If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au
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.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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