The Housing Industry Association’s Harley Dale and the Urban Development Institute’s Michael Corcoran have called for the repeal of Stamp Duty in favor of a broad-based land tax, News Corp reports today.

Both lobby groups fear an extension of the GST to building products, which would be passed on in higher new house prices and also lift the market price of existing houses.

“I think everyone including the Reserve Bank agrees that the only long term solution is to increase the supply of new houses and apartments,” Mr Corcoran said.
“If the GST increase only applies to new houses and apartments, prices must go up. And that will have a spill-over effect to established housing.”

He said ordinary families’ ability to make their mortgage repayments were hanging by a thread, sustained only by record low interest rates, which would not last.

And developers would be forced to reassess whether new projects were viable, he said, as a fifty per cent tax hike would “make significant inroads” into their profit margins.
“And this will impact on their ability to raise finance by demonstrating that the project is feasible,” he said.
Mr Corcoran called for a general land tax to be considered instead of raising the GST.

He’s right. If this extra impost falls on developers and builders, their margins and future projects will shrink mightily. If passed on, the cost of our already-unaffordable houses will skyrocket.

What and where we tax ourselves really, really matters.

Housing Industry Association chief economist Harley Dale said if GST applied to new housing hit 15 per cent, the impact on the sector would be profound.

“It’s a bit of a no-brainer,” Mr Dale said, predicting a “sharp decline” in construction.

“There would be a significant reduction of new housing from both an investor and owner-occupier perspective,” he said.

The HIA is pushing for new properties to be exempt from any increase in the GST and wants alternative tax reform on the table, such as a broadbased land tax that would replace stamp duty.

“At the end of the day it’s a roof over someone’s head, it’s shelter. It’s a necessity.”

The Abbott government really, really wants to shift the tax burden even more onto working stiffs but is coming up empty-handed. Increasing the GST would oblige very large compensation payments to the poorest, so undermining the revenues the change isn’t worth doing.

Builders and homebuyers need land. The best way to bring forth a plentiful supply is with land tax, putting a price on holding it out of use.

Removing Stamp Duty will shrink the cost of buying and selling to little more than agent’s fees. Those trapped in and out of housing will be able to easily change their circumstances.

This exchange is pro-growth, pro-activity and puts our land to its best and highest use. Do it.