Finder’s RBA survey: Stamp duty to go? 54% of experts say a property tax could help first home buyers

Posted: 1 March 2022 3:16 pm
News
First home buyers_GettyImages_1800x1000

The nation's experts are split on whether stamp duty will be replaced by a form of property tax within the next 3 years.

In this month's Finder RBA Cash Rate Survey™, 38 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

All participants correctly predicted a cash rate hold in March.

Interestingly, almost half of experts (42%, 11/26) who weighed in* expect stamp duty to be replaced by a form of property tax within the next 3 years.

Graham Cooke, head of consumer research at Finder, said this was a large proportion of experts expecting such a big change.

"The reality is that the current stamp duty system is a blocker to a free-flowing housing market.

"For a home that's worth around $1 million, stamp duty in NSW or VIC will cost you upwards of around $40,000, which can't be included in your loan and is a huge additional cost to homebuyers on top of high housing prices.

"It makes it far more difficult for first-time buyers to get on the property ladder, and can discourage current homeowners from upsizing or downsizing due to this extra cost. We need a better system."

Just over 1 in 2 (54%, 13/24) agree that if a property tax is introduced, more first home buyers will enter the market.

Experts predict a drop in property value

Westpac recently forecasted that property prices will drop 14% over the next 2 years.

However, only a small portion (14%, 4/28) of panellists agree with this forecast. Almost half (46%, 13/28) believe prices will fall, but won't see a drop as drastic as 14%.

On the other hand, 1 in 10 (11%, 3/28) predict that prices will go up over the next 2 years.

Cooke said Westpac had predicted a 20% property price drop in early 2020 due to COVID-19 lockdowns.

"The bank quickly adjusted its prediction when the economy proved more robust than expected.

"It seems the panel feels Westpac's current forecast of a 14% price drop may be heading the same way.

"Australians, however, tend to be optimistic about the housing market. Avoiding a global financial crisis (GFC) will do that to you. It's important to remember that house prices can go down as well as up.

"While this hasn't been the case in Australia, it has happened in other similar economies such as in Ireland where property prices dropped by over 50% from their peak in some instances following the GFC," said Cooke.

Rental price predictions by the end of 2022

Sydney is predicted to see the biggest rental price increases for both houses and units, according to experts.

The predicted 4% increase to both rental house and apartment prices in Sydney would see costs increase by $25 and $21 respectively by the end of 2022.

Brisbane is close behind, with the predicted 5% increase to both house and apartment prices tipped to increase costs by $24 and $21 respectively over the same period.

Houses

CityMedian asking rent in the last 12 monthsPredicted percentage increasePredicted price increasePredicted price by the end of 2022
Sydney$5854%$25$610
Brisbane$4605%$24$484
Adelaide$4205%$20$440
Melbourne$4404%$18$458
Perth$4503%$12$462
Source: CoreLogic, Finder's RBA Cash Rate Survey 2022

Apartments

CityMedian asking rent in the last 12 monthsPredicted increasePredicted price increasePredicted price by the end of 2022
Brisbane$4005%$18$418
Sydney$4804%$18$498
Adelaide$3604%$14$374
Melbourne$3903%$13$403
Perth$4003%$11$411
Source: CoreLogic, Finder's RBA Cash Rate Survey 2022

Cooke said while demand for rentals had slowed following lockdowns in 2020, it was making a strong comeback.

"As the country continues to open up, we're seeing an influx of new renters in inner city and university areas start to return.

"We expect this demand and price pressure to continue as things slowly get back to normal."

According to Finder's Consumer Sentiment Tracker, a nationally representative survey of more than 30,000 respondents, those who rent report lower levels of happiness and higher levels of money stress than homeowners.

Negative gearing is here to stay

Almost all experts (97%, 29/30) believe that negative gearing won't be abolished by the next federal government, regardless of which party wins.

If negative gearing were to be removed, three-quarters (76%, 16/21) of experts believe that property prices will decrease, with 24% (5/21) going as far as to say prices will decrease significantly.

Cooke said the Labor Party learned a tough lesson in the last federal election.

"Negative gearing, despite being a clear catalyst for decreasing housing affordability, is a touchy topic in the electorate. Many property investors benefit from negative gearing, as they're able to offset any losses during the financial year against other earnings, such as a salary or wage.

"It is unlikely either political party will propose eliminating it any time soon."

*Experts are not required to answer every question in the survey

Here's what our experts had to say:

Nicholas Frappell, ABC Bullion: "Persistent price pressures and a robust labour market will encourage the RBA to take earlier action to tighten monetary policy."

Shane Oliver, AMP: "The RBA's conditions for raising rates are likely to be in place by the September quarter. Unemployment is likely to have fallen below 4% by mid-year equating to "full employment"; wages growth is accelerating and is likely to be running at an annual pace of 3% or more by mid-year; underlying inflation is likely to continue running above the midpoint of the 2–3% target range. Our base case is for the first hike to be in August but there is a very high risk it will come in June if wages growth picks up as we expect, underlying inflation continues to surprise on the upside and unemployment continues to fall."

Annette Beacher, ausbiz: "More data reports are needed to pull the trigger, as the RBA told us ad nauseam recently."

David Robertson, Bendigo Bank: "The RBA is very close to starting their tightening cycle and exiting pandemic monetary policy settings, but will probably wait for 2 more sets of inflation data (in April and July) before hiking rates in August. A series of cash rate hikes up to around 1.5% by mid-2023 should then follow."

Sean Langcake, BIS Oxford Economics: "The RBA's messaging remains very patient on rate rises. We agree with their assessment that headline inflation will ease back after Q1 as fuel prices correct and supply networks normalise. If this comes to pass, they will allow for a wage growth recovery to properly take root before raising rates."

Brian Parker, Chief Economist: "It'll take some months for the Bank to get enough evidence of sustainably faster wage inflation in order for them to move."

Peter Boehm, CLSA Premium: "The pressure for increasing the cash rate is building and the first increase which I expect to occur around the middle of the year will be followed pretty quickly by further increases. Mortgage borrowers should take measure as those coming off fixed rates and those on variable rates will likely face much higher monthly repayments over the course of 2022 and beyond."

Stephen Halmarick, Commonwealth Bank: "Wages and inflation pressures are building."

Saul Eslake, Corinna Economic Advisory: "By August there will have been 4 consecutive readings of 'underlying' inflation within the target band, and evidence of a pick-up in wages growth, sufficient to persuade the RBA that inflation is 'sustainably' within the target band."

Craig Emerson, Emerson Economics: "Much of the inflation is transitory, caused by supply-chain disruptions. The RBA will see through this and wait for wages to rise."

Mark Brimble, Griffith University: "June call will depend on the degree to which inflation is shown to be transitory (or not). By then supply chains and labour markets (opening of borders) should settle down and hopefully, geo-political issues currently impacting on energy markets will also have reduced – all of which are disinflationary and the underlying pre-COVID macros may return."

Tim Nelson, Griffith University: "Inflation pressures are building. Given monetary policy lags, an early rate rise is potential (and possibly likely)."

Tim Reardon, Housing Industry Association: "It will take this long for wage and inflation pressures to become broad and embedded. Current inflationary pressures are largely contained to fuel prices and home building costs. Inflation in Australia is relatively low by international standards. Supply chains are headed in the right direction to ease price pressures. Structural issues that suppressed interest rates before the pandemic still exist and will require years of infrastructure investment and structural reform to address."

Angela Jackson, Impact Economics and Policy: "Strong employment growth and healthy inflation are likely to require the RBA to start the process of normalising interest rates. They may move earlier than September, with a move in the third quarter of 2022 most likely. Any further COVID-19 outbreaks would change this timeline."

Sarah Hunter, KPMG: "The economy has shaken off Omicron, and with the labour market continuing to tighten, wages growth is likely to lift (which in turn will feed into price inflation). We expect that the RBA will have enough confirmation of these trends by August, which will trigger rate lift-off."

Leanne Pilkington, Laing+Simmons: "Much will depend on the March numbers. While some economists have suggested a rise as soon as mid-year, the RBA continues to temper the discussion by insisting it won't move until it's sure of where wage growth and inflation actually sit. It's a guessing game, but at this stage, we believe an increase is more likely later in the year."

Nicholas Gruen, Lateral Economics: "I've never believed that they'll deliver on previous intentions which I think of as part of the (usual) overshooting of the cycle. Already it's pretty clear they're not going to wait several years, which was the original story."

Mathew Tiller, LJ Hooker: "Despite the strength of recent economic data, concerns around COVID and geopolitical issues cloud the outlook. That said, recent comments and economic data ensures the RBA is likely to increase the cash rate earlier than previously expected."

Geoffrey Harold Kingston, Macquarie University: "Inflation around the world is rising faster than expected."

Jeffrey Sheen, Macquarie University: "The key (trimmed) measures of Australia inflation have just reached the RBA's target range after 5 years being below. The RBA should and may well wait until 2023 to see if inflation remains stable. The tapering of bond purchases in 2022 is a suitable response in current circumstances."

Michael Yardney, Metropole Property Strategists: "The RBA will be patient and wait for signs that inflation will remain consistently within their desired band and that wages growth is consistently occurring."

Mark Crosby, Monash University: "Sufficient inflation data will have been published by Q4 for the RBA to be comfortable raising rates."

David Zammit, Mortgage Choice: "I don't expect a change to the cash rate in March. Quantitative easing, which is the process of the central bank pumping money into the system to push rates artificially lower, has now stopped in Australia which has had the 'feel' of interest rates rising even though the RBA hasn't shifted the official cash rate. The labour market is strong and while inflation is on the rise, it remains lower than in other countries, in particular the United States. Competition in the home loan market is fierce, and fixed rates are starting to rise because the market's expectation is that interest rates will start to ramp up in the future. Variable interest rates are still low as they reflect short-term borrowing markets while fixed rates are longer-dated depending on the term. Mortgage Choice monthly home loan approval data shows that borrowers are responding to these changes in home loan pricing, with demand for fixed rates steadily declining since October 2021."

Andrew Wilson, My Housing Market: "Highly improbable sustained annualised quarterly Wage Index increases above 3% before 2023 – this is the RBA's clearly stated precondition for a rate rise."

Alan Oster, NAB: "Economy will be better and unemployment near 3.6%. Price and wages pressures are building, so it's time to start renormalising, but wouldn't rule out November either."

Malcolm Wood, Ord Minnett: "The RBA is patient, waiting for wages to sustainably be over 3% year-on-year, and therefore underlying CPI sustainably in the 2–3% band."

Rich Harvey, Propertybuyer: "Inflationary pressures are building momentum in the economy due to supply chain disruptions and looks like wages growth is slowing building – so the RBA's view will likely change over the next few months leading to one or two small increases in late 2022."

Matthew Peter, QIC: "The RBA needs to raise rates this year. It will be either at their August or September meeting. The August meeting coincides with the release of the Statement of Monetary Policy. But between then and their September meeting is the release of the quarterly wage data. The RBA will wait for the wage data to confirm their first rate hike."

Noel Whittaker, QUT: "With banks increasing rates anyway it's about time the reserve bank joined the party."

Jason Azzopardi, Resimac: "The RBA remains steadfast on underlying inflation being sustainable with target band before increasing rates and I can't see this happening before Q4 or 2023."

Christine Williams, Smarter Property Investing: "As previously mentioned our unemployment rate is quite low and the federal election is in May. Global money is still at its all-time lowest, I think even with house prices increasing and wage increases delayed the RBA will not increase before the end of quarter 3."

Jonathan Chancellor, The Daily Telegraph: "While a 0.1% cash rate is no longer needed, the RBA is obviously still prepared to wait to see just how much of the year pans out. It seems unlikely to move until concluding that the inflation spike is persistent, and that will need to include wages growth which remains weak. The opening of borders between states and countries will be closely watched, especially for the impact on employment. Obviously, the RBA has recently advised it was plausibly possible to see the rate hikes start this year, which is reason enough to think it will."

Mala Raghavan, University of Tasmania: "The Australian economy is recovering, and the people are slowly learning to live with COVID. However, the rising inflationary pressure driven by oil price shocks, supply disruption and the recovering consumer demand could lead to a cash rate hike much earlier than anticipated, i.e. somewhere between early to mid-2023."

Jakob B. Madsen, University of Western Australia: "The demand for liquidity across the world will increase along with higher government debt and push interest rates up across the world."

Dale Gillham, Wealth Within: "The current inflation rate is in the range that the RBA likes, and with the country opening up, issues around supply chain will ease so I expect inflation will fall somewhat and ease the pressure to raise interest rates before mid-year."

Brodie Haupt, WLTH: "With continued uncertainty and rising pressure on the economy, I don't think there will be a change to the cash rate until 2023. I feel it will take some time to meet the sustained 2–3% target range."

Other participants: Peter Munckton, BoQ. Stephen Koukoulas, Market Economics.

Find the right home loan now

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site