Leading Australian think tank the Grattan Institute has joined the fight against stamp duty on property transactions (see Renovating housing policy and Jessica Irvine’s article). Grattan notes (on p.32):
Stamp duty and pension asset tests create large disincentives to households moving. Australia imposes some of the highest transaction costs in the world on buyers and sellers of housing. As a result, home owners are less likely to move than renters. This has implications both for the matching of housing to needs and for the functioning of labour markets.
By placing a large additional cost on buying and selling a home, stamp duty distorts households’ choices. To avoid future stamp duty, first time buyers may buy a larger house than they need. Similarly, older households may avoid downsizing. Both lead to the over-production of large houses, taking up more land than is necessary, limiting space for housing in the inner and middle ring suburbs and pushing cities outward.
I’ve written before about the large inefficiency associated with stamp duty and the desirability of replacing it with expanded GST revenue: