Carbon tax deals another blow to housing affordability

Written by Amanda Lynch in National on August 1, 2011

Carbon Tax Effect on Housing Affordability 2011The Federal Government has attempted to soften the blow of the carbon tax on households, in part through tax reform. However with all major reform there are winners and losers – and home buyers are the big losers when it comes to the carbon tax.  With housing affordability at an all time low, and the government pledging to tackle housing affordability earlier in the year, it was both surprising and disappointing to see that the Federal Government has not introduced measures to offset the impact on the carbon tax for home buyers.


No relief in sight for first home buyers

Prior to the tax announcement, the REIA lobbied the government to review the First Home Owner’s Grant and bring it in line with median house price increases. With first home buyers already struggling to cope with current house prices, the percentage of first home buyers purchasing property  has declined by 5% and currently stands at 15%.  As a result of the carbon tax however, those aspiring to own their own home and get their foot onto the property ladder have been dealt another blow with the on flow effects of the carbon tax set to substantially increase the cost of ownership.

So what will the carbon tax add to the price of buying a home?

The cost of the carbon tax on housing

With the cost of raw materials and transportation set to rise, we estimate, that the carbon tax will  increase the cost of constructing a new home by approximately $5,000.   However the true cost to home owners is significantly higher.  Calculations by HIA have forecasted that the carbon tax will add approximately $13,000 over the life of a 25 year loan.

As the price of new homes are set to rise, we anticipate this will also have a flow on effect to demand for existing housing.  As more buyers seek to purchase establish homes, this demand will also fuel growth in prices for this segment of the market.  All of which further deteriorates the level of housing affordability in Australia.

Existing home owners will also experience the effects of the tax if considering renovating – with an average kitchen and bathroom renovation expected to rise by approximately 2 per cent.