In my previous blog I intimated there was a shortage of quality property in Australia. I stand by this statement. I also said that stamp duty was not a major cause of the property bubble. Well on reflection, the statement about stamp duty was off the mark. Stamp duty and other government charges have led to a reluctance of certain citizens of our great land to move to smaller or more practical dwellings. Maintaining a huge property is hard work and expensive, yet many prefer this to forking out mega bucks for stamp duty and other fees. This reluctance has led to short supply in most areas near popular schools and infrastructure.

How do we solve this problem? I think the only way is to promote subdivision.

As I have previously endorsed, the ability to subdivide the land that your house occupies and build two or more townhouses is the ultimate value in property investing. You can’t subdivide a flat or unit generally.

Tax breaks for principle place of residence owner developers is the answer. Allow them to roll the profits into their super tax free. Allow it as a once off per person in their life time. Makes more sense than the first home owners grant, creates some liquidity in the market and it may give the Government some savings on pensions etc. We all know an elderly lady who has lost her husband but still lives in the grand mansion and gets a pension don’t we? Why not help her into a better equipped, up to date townhouse that is virtually maintenance free?

Demolish, subdivide and build! That’s my motto.

Talk about making money out of misery! The world wide housing price bubble is the source of all the recent financial turmoil, threatening our very way of life. Yet State and Territory governments across Australia have raised $53 billion from stamp duty on property purchases for both residential and commercial property over the past five years according to report just released by Bankwest.

Like many I have felt the pain of State Government fees such as mortgage stamp duty, title transfer fee and property stamp duty. You cannot avoid them, they are just a part of doing business in Australia. However, was not the GST going to lead to abolishment of all these State Government taxes and charges? The recent First Home Owners Boost is really just a transfer of funds from Federal to State Government coffers, as it mainly goes to pay the stamp duty!

As expensive as stamp duty is, I do not think it is a contributor to the housing price bubble as it is called by the popular press. The main reason is without doubt the easing of home loan mortgage lending criteria. In fact the easing of lending criteria full stop. The lender’s have let loose a wave of credit fuelled consumer demand on a limited finite resource of desirable property. The result: State Governments with fat budget surplus to waste and home ownership out of reach for future generations. At least interest rates are coming down!

Why not spend some of this money creating jobs in manufacturing or environmental salvage? My local engineering works and the Murray river could do with some help.

Don’t forget to take stamp duty and other government fees into account when you do your home loan calculations.