Wouldn’t it be a good idea to sell the house and buy a unit with a balcony and view in a good area? The money leftover could be used to provide a bit of extra retirement income as could the money not spent on the gardener and garden.
We could at least put our toes in the water to see how much the house would fetch to see how much money might be left over.
Money left over. What money left over?
The whole idea turned sour – almost entirely due to government-imposed burdens.
To put the house on the market you first have to get a building report and an environmental-efficiency rating.
The fact the house got a five-star rating when it was built five or six years ago does not exempt you. It is illegal to advertise a house for sale in the ACT without a current rating – done in the past few months.
It is an environmentally destructive exercise – all that paper and petrol to produce a report that does nothing. No-one is required to act on the report. There is no requirement for sellers to bring their dwelling to a minimum rating. All you need is a dozen sheets of paper to tell prospective buyers how environmentally efficient or inefficient your house is — something they could see with their own eyes if they were so concerned about it. Or something they could pay to get done themselves if they thought it important.
Now a whole industry has been built up around it, as has a whole lot of self-serving propaganda about why it is a good thing – when it demonstrably achieves nothing.
And you cannot even say: “Look just rate the thing at zero stars and advertise it.” That is illegal. A certified rater – at cost – has to rate it, even at zero stars.
Then we have the building report. It is in the seller’s interest to get a quick tick and flick report just to satisfy the legal requirement. The theory is that prospective buyers can look at the report and be in a position to exchange contracts immediately – thus avoiding the possibility of being gazumped by another buyer who offers more.
The theory is wrong. Solicitors still like to take their time looking at contracts before buyers sign up. Moreover, why trust a building report commissioned by the seller. A serious buyer would get their own.
Sure, there is some protection with the seller’s report, but why does it have to be compulsory. Those sellers who see an advantage in providing a building report will do so. Others who want to just test the market shouldn’t have to.
It is not as if the parties here are unequal — a big mean corporate seller and a hapless buyer. No, they are both typical householders on an equal footing. And in any event if someone offers a higher price, why shouldn’t the seller take it.
It gets worse, when the sale is completed, the buyer has to pay for the building report that the seller commissioned.
Or worse still, you still have to get these reports even if the house being sold is an obvious knockdown and is bought and sold with that intention in mind. Buyers still have to pay for a building report on a house that is to be immediately demolished.
Again, a whole industry has built up over it, along with any amount of self-serving propaganda to justify its preservation.
Then you have up-front advertising fees. That’s fair enough, at least someone is doing a service.
But the biggest impediment to moving house is stamp duty. For nearly 30 years there has been virtually no change in stamp duty to take account for inflation.
Indeed, in 2002 the ACT increased the marginal stamp duty rate on houses over $300,000 from 4.5 per cent to 5.5 per cent. At the Budget lock-up press conference then Treasurer Ted Quinlan berated me when I asked him to justify the increase. He said $300,000 was a high-end house and people who could afford such a house should carry a bigger tax burden.
A decade later and you can’t even buy a dog box in outer woop-woop for $300,000, but still the marginal stamp duty is 5.5 per cent over $300,000 and even more for houses over $500,000.
If the Commonwealth had done the same thing with income tax we would be paying 66 per cent tax on all income over $50,000.
Stamp duty is a serious impediment to people moving to more suitable housing as they become “empty nesters” or as they approach winding down or retirement.
Quite a lot of apartments in Canberra in good locations with views cost $1.5 million or so. The stamp duty on that is an eye-watering $83,000.
Add an agent’s fee on sale (at least they earn it), removal costs and the unnecessary costs outlined above and the whole exercise becomes uneconomic. Most of the gain in downsizing is snaffled by richly undeserving middle people.
Bear in mind that 10 per cent GST has already been paid on the construction costs of dwellings built after 2000.
Stamp duty is an extremely inefficient tax. It is a barnacle on people moving to more suitable housing and freeing up larger dwellings for younger families. Also it encourages people to extend rather than move – again an inefficient misallocation of resources.
This might sound like a whinge by relatively affluent people who should pay high tax. But it is really a call for more efficient taxes. It would be better to have a higher GST and abolish inefficient taxes.
You could even reintroduce death duties. People could pay their “fair share” after they have moved and lived in their more efficient housing – and at a time when it won’t hurt them.
In the 1970s when Queensland led the way in abolishing death duties it crowed as retirees fled to Queensland to escape death duties. They got it wrong. Why attract a lot of voracious users of the health and other state and territory services? A state or territory would be better off if a death duty caused the elderly to go elsewhere.
In the meantime, we’re staying put.
This article first appeared in The Canberra Times on 10 September 2011.