A rising Canberra property market, an oversupply of some housing types and an affordability problem is a tangled mess for the ACT government to unpick, and its instruments for doing so are untested.
That's because one of them - a transition away from conveyancing duty to annual charges - is a novelty for Australia. Championed by economists as a more efficient way to tax property, and one that doesn't eat into housing deposits or blow out mortgages, the ACT's gradual shift from conveyancing duty to a yearly charge has apparently already relieved buyers of some cost involved with buying a home in Canberra.
The ACT government's take of stamp duty as a proportion of its revenue is falling, and it made up less of its total tax income last year despite a backdrop of rising property prices. Stamp duty costs Canberrans less as a proportion of house and unit values than in other parts of the country. This can only be a good thing, surely?
Not entirely. As rational as the abolition of conveyancing duty appears to be, the ACT is an island in a sea of growing government dependence on stamp duty in other states. Results from last quarter show just how much the charge lifts their tax take. States and territories collected a total of $20 billion in stamp duty revenue, or 26.1 per cent of the total state or territory government tax take, the highest proportion in "nearly a decade", the Housing Industry Association said.
Canberra went against the grain in this, and that may make it a target of investors looking to buy in a rising market without shelling out for stamp duty. The ACT government has apparently tried to bat this problem away partly with a land tax hike for investors who own units, something that may encourage them to sell or stay away, and ease rising housing prices. The impact on rental stock - and prices - is another matter.
Foreign investors may also find the ACT's falling stamp duty take attractive. This raises the territory government's other, new instrument for untangling the property market knot. Looking interstate, and seeing it is alone bar the Northern Territory in not applying a surcharge for foreign buyers, the ACT government has decided it couldn't let the status quo continue.
It's heralded its land tax hike for foreign buyers, but their impact on the market appears to be relatively small. Recent research from the ANZ and the Property Council found 11.9 per cent of sales were to overseas investors in December - down from 17 per cent last year. The affect their spend has on the ACT market needs further measuring before Canberrans can accept the government's enthusiasm about its tax hike.
Taxes against foreign investors make good headlines for government and score them easy points. In truth, the relief this will bring local buyers is unknown and at first look, will be small.
Morning & Afternoon Newsletter