If you want an example of how stimulus sensitive the Australian housing market is, look no further than Brisbane or Canberra. Transaction volumes absolutely spiked in July. In Brisbane, our estimate of transaction numbers surged by 52% compared with the June reading, and in Canberra the number of home sales was 41% higher than sales in June.
The last time month-on-month transactions were that high in Brisbane was back in March 2010, and for Canberra the number of sales in July hasn't been that high since March 2011.
Of course, the surge can be attributed to the changes in stamp duty rules in both Queensland and The Australian Capital Territory. The large jump in Queensland can also be attributed to the pre-concession slowdown where buyers put off their purchase until the savings became available on July 1.
Queensland brought back the 'Transfer Duty Home Concession', which provides a concessional stamp duty rate of 1%, up to a value of $350,000 for owner occupier purchasers. This is separate from the first home buyer stamp duty concession, whereby first time buyers pay nil stamp duty on purchases up to $500,000. The changes can save buyers up to $7,000 when they purchase a home.
Under the ACT's 'Taxation Reform Plan' stamp duty is on its way to being abolished completely. Although the reforms became 'live' on June 6th of this year, the effect of the stamp duty discounts are certainly clear based on the July numbers. A statement from the ACT Government spells out their views on stamp duty:
“Stamp duty is unfair, and poses a significant extra cost burden on people buying a home. It will be phased out progressively over twenty years. From tomorrow, stamp duty will be decreased, making buying a home cheaper. Stamp duty on a $500,000 home, for example, will fall by $2,450 immediately and by more than $7,000 over five years.”
The table below outlines the stamp duty savings from the new scheme (see the document here). With the Canberra median house price at $545,000, a saving of more than $2,450 is a reasonable incentive.
A similar phenomenon was evident New South Wales, when the State Government announced stamp duty exemptions would cease on January 1st 2012. As a result, there was a 23% surge in buyer activity over the last quarter of the year compared with the September quarter.
Of course, another example of a stimulus in the housing market is the recent interest rate cuts, which are a much broader based incentive. It is no coincidence that the housing market started to gain traction at the end of May, after the RBA cut rates by 50 basis points, and again in June, slicing a further 25 basis points off the cash rate. Since the end of May, capital city dwelling values have risen 3.1%; with the further rate cut in October, it is logical to presume that the effect will provide further momentum for dwelling values.