The High Cost of Building: How Taxes and Regulations Impact Your Home

For many Australians looking to build or buy their dream home, the cost of construction and property has become a major concern. Government taxes, fees, and regulations are driving up prices, making it harder for individuals and families to afford new homes. In fact, the housing sector is the most taxed sector, apart from alcohol and cigarettes. According to a new report from the Housing Industry Association (HIA), these costs can account for nearly half of the total price of a new home, impacting everyday Australians who want to build, renovate, or invest in property.

How Taxes Are Adding to Your Building Costs

The report, conducted by the Centre for International Economics (CIE), outlines how government-imposed costs contribute to the final price of a new home.

If you’re planning to build, it’s important to understand where your money is going:

• Melbourne: Government-imposed costs on new housing have also surged, adding $375,000 to a typical house and land package. Apartment construction faces similar pressures, with tax-related expenses reaching $265,000, comprising 42% of the total price.

• Sydney: Government taxes and regulatory charges can add up to $576,000 to the cost of a new house and land package, making up nearly 50% of the total price. If you’re considering building an apartment, these costs can reach $346,000, or 38% of the total price.

• Brisbane: Since 2019, the cost of government taxes and regulations for new housing has more than doubled, increasing by $179,000 (a 106% rise). And new apartment costs have risen by $104,000, marking a 68% increase.

For everyday Australians looking to build, these figures mean that nearly half of your budget may be going toward government-related costs rather than materials, labor, or land.

How This Affects You:

Whether you’re building a home for the first time, upgrading to a larger modern home, or constructing a dual occupancy property excessive taxes and regulations can create significant challenges:

• Higher Upfront Costs: If you’re looking to build, you’ll need a larger budget just to cover government fees before construction even begins.

• Delays in Construction: Permitting, zoning regulations, and taxes slow down the building process, meaning you might wait longer to move into your new home.

• Smaller Homes or Compromises: Due to the high costs, some Australians are forced to scale back their home size, reduce custom features, or eliminate upgrades to stay within budget.

• Increased Mortgage or Loan Debt: With higher home costs, many builders must borrow more money, leading to increased long-term financial burdens.

What Needs to Change to Make Building More Affordable?

The HIA is calling for tax reform to make it easier and more affordable for Australians to build their homes. Reducing unnecessary taxes and streamlining the approval process could:

• Reduce overall home prices, making construction more affordable for more Australians.

• Encourage more home builds, helping to ease housing supply shortages.

• Allow buyers to spend more on quality materials and design rather than paying excessive fees.

• Make home ownership more accessible to first-time builders and young families.

Key Reforms That Could Benefit You

If you’re planning to build, the following changes could significantly reduce your costs:

• Lowering Stamp Duty: Stamp duty is a significant upfront cost that adds thousands to your total home price. Reducing this tax could save builders a substantial amount.

• Reducing Developer Charges: These fees are passed onto homebuyers and can make land and house packages much more expensive.

• Simplifying Planning Regulations: Streamlining approval processes would speed up construction timelines and reduce costly delays.

• Adjusting Land Taxes: Encouraging investment in new developments would help increase housing supply and affordability.

A Call to Action for Builders and Homeowners

With government-imposed costs making up nearly half of the price of a new home in some areas, it’s crucial for prospective home builders to be aware of these financial barriers. While material and labor costs are unavoidable, excessive taxes and regulatory fees are factors that can be changed through policy reforms.

If you’re planning to build, consider reaching out to policymakers and industry groups like the HIA to support initiatives aimed at lowering housing taxes. By advocating for smarter policies, Australians can work toward a future where building a home—whether it’s a French provincial, or a modern home—is more accessible, affordable, and achievable for everyone.

Credit to HIA and the CIE for the report, information and graphs. See full report and article here.