Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Thursday, 21 April 2016

Stamp-collecting!

Stamp duty bonanza for NSW

Not quite philately, I'm afraid, but the latest data provided by the Office of State Revenue NSW showed that the total stamp and land transfer duty paid over the last 12 months stayed steady at an astronomical $8.7 billion, with more than $1.2 billion having been collected in the month of December alone.

The chart more or less speaks for itself.

But just in case it doesn't, stamp duty collected by the New South Wales State Government has comfortably more than doubled over the past three years.


Holy cow

Cyclically speaking, you might argue that now would be the perfect time to abolish stamp duties in favour or a broad based land tax.

But the chart above also demonstrates why that won't happen.

While stamp duty is no doubt an insidious tax which discourages labour force mobility, it has also become far too lucrative for states such as NSW to consider abolishing it.

Arguably a transactional tax could also keep the market more stable by discouraging flipping or rapid turnover and ultimately keep a ceiling on prices, though that's open for debate.

The latest available data shows that there are fewer than 3 million dwellings in New South Wales, at around 2,975,600.



Mostly the residential dwelling stock in Australia is owned by households, in the case of New South Wales about $2.17 trillion of it, as compared to $120 billion owned by non-households.

Conceptually it might appears possible for about 2.8 million households to stump up an extra $8.7 billion per annum in land tax, but realistically it would just be politically too hard to implement.

One of the reasons for this is that all of those homeowners have already paid stamp duty in good faith, so asking them to pay even more tax on top of the annual rates they already pay to the tune of thousands of dollars per annum is likely to be as popular as...well, whatever the idiom is for something that isn't very popular.

A point that seems to be rarely mentioned that is that New South Wales already has a 1.6 per cent land tax above a threshold of $482,000 (with a 2 per cent premium rate for higher value properties), but with a PPOR exemption.

Thus the obvious whales are already largely off limits, since they're already being harpooned at a punishing rate.

This essentially means that the blubber is already being whaled, and the homeowner plankton would need to be harvested (OK, I don't think the metaphor extends this far).

There are also a wide range of further arguments against land tax, which I don't have the space to reproduce here.

Mainly these include that land tax takes no account of ability to pay - the "poor widows" argument - that some people will be forced to sell their homes or trade down.

And that a tax which is designed to lower the value pool of what it is levied upon would eventually be self-defeating, and could even cause a financial collapse depending upon who you choose to believe.

When you drill into the practicalities you also discover that land tax is not quite as equitable as it first appears, while there could also be a large administrative burden and dozens of unintended market distortions, including turning family homes into income-generating doss-houses, or landlords increasing rents, or a boom in tax-avoidance schemes, or...

These arguments have all been covered in detail on the world-wide-interweb.

In any event, it seems hard to imagine that the panacea for increasing homeownership - as the idea of a broader based land tax is often badged - could be to make home "ownership" (if you can even "own" something which is taxed annually) unattractive by taxing it annually.

Stamps and land transfers are one of those ugly taxes which you would dismiss out of hand if creating a new tax system from scratch, yet won't be scrapped due to them being such a cash cow for state governments.

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The iron ore spot price has soared by a further 11 per cent over the last three trading sessions to $64.77/t, to be up by nearly 50 per cent over the calendar year-to-date.

The iron ore spot price is now at its highest level since June 2015, and are rapidly closing in on the prices last seen in January 2015.

Dalian coking coal futures are also up by more than 55 per cent over the year-to-date.

Oil up. Copper up.

An enormous boost to the budget.