October 15, 2025 • 22 mins
Hosts Ciaran O'Brien and Peter O'Malley unpack why a seemingly “small” price change can translate into a substantial real-world loss once you factor in stamp duty, agent fees, legal costs, and market timing. Using real examples, they illustrate how the 10% break-even rule plays out and why meaningful tax reform could help unlock better housing mobility.
We also discuss:
- The 10% break-even reality across different market segments
- How stamp duty brackets and bracket creep erode gains
- Real examples of sellers taking losses despite higher sale prices
- What transaction costs you can and can’t control
- How capital gains tax (CGT) discounts and losses actually work
- The difference between tax-free gains on a primary residence vs. investor treatment
- Common media myths vs. the true net financial outcomes
- Who to consult for expert financial and property advice
- How strong agency work behind the scenes adds measurable value to a sale
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:29):
Hello and welcome to another edition of Current
Market in Science.
I'm your host, Kieran O'Brien,and with me as always is Mr.
Peter O'Malley.
Peter, hello.
Kieran, great to see you.
Great to be with you again,mate.
Uh I want to talk today abouttransacting in real estate,
which uh, you know, strangely iswhat we do here on the podcast.
But I'd really like to take abit of a deep dive today into
(00:52):
what are the actual costsinvolved in transacting.
I think most people would beaware of the obvious ones, uh,
but I I know from my time andand you know my own purchase and
and other anecdotes and storiesand things around the industry
that there are costs that somepeople, particularly, you know,
if they're new or inexperiencedin the market, may not realize
(01:12):
are part of the transaction.
Uh so I thought today it mightbe a great idea for you to take
our listeners through what arethose hidden costs, or not
hidden, but what are thetransaction costs involved?
And what are some kind of tipsor strategies for people to uh
be aware of and in many waysmitigate or plan for those?
SPEAKER_02 (01:28):
Uh thanks, Kieran.
Look, I think people should beacutely aware that buying the
wrong property and having toresell it can end in disaster.
Now, when we say the wrongproperty, it can be the wrong
property because it doesn't meetyour needs, um, it's excess to
requirements, it's not bigenough for requirements, um, or
the mortgage is onerous and yourcircumstances change and you
(01:52):
need to resell the property.
And um, in instances where youpurchase a property and then uh
inadvertently uh find yourselfhaving to sell it within a short
time frame, um, you really needthe property market to have
risen 10% just to haveessentially broken even.
SPEAKER_01 (02:11):
Is that 10% regardless of market?
As in, you know, is it 10% inSydney, 10% in Hobart, 10% in
Brisbane?
You know, given that they're alldifferent house values.
SPEAKER_02 (02:21):
Everyone's got every state has its own stamp duty
formula, um, but uh it ends upat about the same percentage,
10% slightly overstating it, butthat's essentially what you need
the market to rise by afteryou've purchased a property just
to be in a break-even position.
SPEAKER_01 (02:40):
Okay, so we'll I'll get you to break down you know
what's involved in in making upthat 10%.
But one question I do have aboutyou know purchasing the wrong
property, I I have to wonderwhat I mean, this is not meant
to be the purpose of today'stopic, but how do people how do
they end up purchasing the wrongproperty?
I mean, what you know, what goesinto that as uh a process that
makes someone move in and go,actually, all of a sudden, you
(03:02):
know, we're two bedrooms shortor uh the mortgage is too high?
I mean, are these not factorsthat people that should should
be considered before thepurchase is done?
SPEAKER_02 (03:10):
Look, I don't want to be too harsh because change
of circumstances do happen.
Businesses go bad, people losetheir jobs, um, marriages fall
apart.
Um, so there's a range ofreasons.
And uh, you know, when you go onsocial media, um there seems to
be quite a few accounts um onTwitter particularly that sort
(03:32):
of take great delight um in uhyou know properties that sell
for less than the the ownerspaid.
And uh being a real estate agentand knowing what transaction
costs are, I I think if you takedelight in that, you're you're a
mongrel.
Yeah.
Because there's a real costbehind that, right?
There's a real human cost behindthat.
(03:52):
Like I'm looking at one examplehere up at Hornsby.
Um, to your point, I have noidea why would what would cause
them to trade like this, butthey purchased it in February
2025 for 3.27 million.
Stamp duty on um uh on 3.27million is somewhere in the
(04:13):
vicinity of$160,000,$161.862 tobe precise.
Yep.
They've just resold thatproperty in August 2025 for
$3,170,000.
So that's a loss from thepurchase price.
It's a hundred on the cleanhundred on the purchase price,
$161,862 on the stamp, so you'rea quarter of a million there.
(04:36):
Probably paid someone$60 to sellit.
Um so you're uh you're out to$320 odd there.
You probably paid moving costsin and moving costs out.
So let's just round that out at$10.
Um, you've probably paid umanother six or seven in legals,
um and and and I dare say you'vedone some improvements to the
(04:57):
property in the time that you'veowned it.
So a disastrous outcome headingtowards$400,000 loss, even
though the difference betweenthe purchase price and the sale
price was only$100,000 less.
Now, the most onerous cost whenit comes to transaction costs is
clearly and indisputably stampduty because since I joined real
(05:19):
estate, the stamp duty chart hasnever changed.
The higher the price, the higherthe percentage you pay in stamp
duty.
Yeah.
So that was just classic bracketcreep um buried into the stamp
duty equation.
So uh, for example, in 2000,when I sold my first house for
$420,000, um, I think the stampduty percentage then was about
(05:41):
3.8%.
That same house now recentlytraded for I think it was uh 2.1
million, 2.2.
Um, but stamp duty has a slidingscale, but the purchases would
have paid somewhere around fourand a half, heading toward five
percent stamp duty on that one.
SPEAKER_01 (06:01):
On a much higher price, yeah, for the same
property.
SPEAKER_02 (06:05):
So uh, and then if you go higher again when you get
into the three and the I thinkit's maybe five or six million,
you get further acceleratorswhere the stamp duty uh above a
certain price point kicks out tobeing seven percent.
SPEAKER_01 (06:17):
Yeah, wow, which is substantial, yeah.
SPEAKER_02 (06:20):
So um when you're talking these numbers, stamp
duty on at 161,000 on threethree point two seven million,
that's essentially five percentright there.
SPEAKER_01 (06:29):
Yeah.
No, it's certainly it's a bigchunk.
I mean, stamp duty is uh it'sone of those interesting topics,
right?
It's you know, my understandingof it is it was ceded by the
federal government to the statesas an incentive in the 60s or
70s, never really vanished.
The states have realized howvaluable it is to their coffers,
uh, and it is disproportionatelyuh disadvantageous, I think, to
(06:51):
to people looking to transact ina modern era.
Given, you know, this is a a bitof a segue, I guess, but given
that we uh in a housing crisisin Sydney, we don't have supply.
Do you think that there's evergoing to be any real like
movement on Stamp Duty to makeit more uh enticing for people
(07:11):
to downsize, for you know,transaction for the sake of in
many ways freeing up better?
You know, you talk often talkabout the the average
composition of the house and howmany people are are utilizing to
bedroom ratios and things likethat.
Do you think there'll everactually be government
incentives to to maximize thatequation and make it more
beneficial to everyone?
SPEAKER_02 (07:31):
Stamp duty.
Yeah.
Well, well, dom Dominic Perretaywent as far as introducing it,
didn't just talk about it, heintroduced it.
It was in for the last six orseven months of his government,
and then Chris Minnes tore it upas soon as he got into power.
SPEAKER_01 (07:46):
Yeah, this is the the lifetime kind of you know,
annual annual tax.
SPEAKER_02 (07:50):
Annual property tax as opposed to upfront stamp
duty, and it would havecollected more over time as an
annual property tax, but if thatwere introduced, it's a much
fairer tax spread over a longerperiod of time where um stamp
duty punishes those that aretrading and has all sorts of
unintended consequences and sideeffects as to how the property
(08:12):
market operates.
SPEAKER_01 (08:14):
Yeah, I wonder whether, you know, New South
Wales governments love to shootdown the other the opponent's
work and then redo it in adifferent format.
I wonder if Chris Mins as partof his housing reforms will ever
do something similar here.
Um, okay, so we talked about uhan example of transacting at a
loss and that being asubstantial kind of uh, you
(08:34):
know, or maybe an unexpected feefor uh those operating in the
market.
Um are you able to kind of talkto our listeners a little bit
about just what kind of makes upsome of the other costs?
I know you mentioned thembriefly.
There are some legals, there aresome agents fees, there are
some, et cetera, et cetera.
But uh outside of stamp duty,which we know can be a little
(08:55):
bit punitive, it is expensive,and it can be uh something that
a lot of buyers don'tnecessarily consider uh when
they come to market.
What are the major componentsthat do make up all of the kind
of transaction costs?
And are there stamp duty?
Are there any the buyers orsellers can, you know, kind of
work around or mitigate as partof the process?
SPEAKER_02 (09:16):
Uh well look about the only ones that you can
mitigate is moving costs.
You can hire a utility or a vanand move yourself.
Just yeah, muscle, muscle costs.
Good good luck with that.
Um I've done that many times.
And you and you can sell withouta real estate agent.
Um, can you get full marketprice?
Maybe, maybe not.
Um, a little bit like um beingyour own removalist.
(09:38):
Good luck with that.
Yeah.
Um, but essentially, uh, youknow, it would be ill-advised to
do your own legals.
It would be ill advised to areyou allowed to?
Is it like is your restrictions?
Yeah, if you make a mistake,it's on you.
Right.
Yeah.
Yeah, but you can self-act.
Highly ill-advised.
Yeah.
Yeah.
And the vendor's lawyer or theuh counterparty's lawyer will
(09:59):
probably end up having to coachthe person through because it's
just too complicated and it'd bea disastrous transaction.
But again, good luck with that.
So realistically, um, very fewpeople opt to sell their
property without a realtor.
Uh, very few people, even lesspercentage of people do their
own legals.
(10:20):
Um very few people, if any, dotheir own removal.
So, in theory, yeah, you can youcan reduce the transaction cost,
but in reality, not really.
So that's where I come back tothat point.
You can see if stamp duty isswallowing five percent straight
off the bat when you purchasethe property in transaction
costs, you can see it doesn'ttake much with everything else
(10:41):
that goes in it to run up to10%.
So when you do see a propertysell for a modest loss or even a
modest gain uh in real terms,that that that can often be a
nasty, uh nasty uh financialloss for someone.
SPEAKER_01 (10:56):
So, what about the one of the other components or
another major component thatcontributes to transaction costs
in capital gains?
So, you know, people that arenot transacting in their primary
place of residence uh activatinga capital gain event.
How does capital gains work inthose kinds of scenarios?
So let's assume uh, you know,for the sake of our our uh
(11:18):
example that the property inHornsby was an investment uh
bought for their children andthey had to sell for whatever,
you know, arbitrary notarbitrary, but whatever reason
they needed to sell for.
They've accrued this incredibleloss.
How does that factor intocapital gains?
Do they can they claim that as aloss?
SPEAKER_02 (11:35):
Yes and no, not all of it.
So stamp duty is not a taxdeductible expense for
investors.
Right.
So you you're you're wearingyou're wearing a clean half of
the transaction costs, whetheryou're an investor, an owner
occupy, you're wearing itregardless.
Yeah.
So there's no benefit there.
Yeah, if you've purchased aninvestment property and you sell
it for a loss, the agents feesand the legals on the way in and
(11:57):
the way out are a tax-deductiblecost.
Um, there'll be no moving costson an investment, of course.
And you can write off repairsand and and capital improvements
that you've you've you've madeon the property if you have done
any in that time.
So there is some taxation uhrelief, but all it's doing is
slightly minimizing the loss.
(12:18):
If you're paying tax, you'remaking a profit, and if you're
claiming a um, you know, uh atax deductible, carrying a
tax-deductible loss goingforward, well, you've still got
a loss of some description.
SPEAKER_01 (12:29):
Yeah, yeah.
So can you take out listers thenif if you're happy to?
An example of let's assume uhagain, just working with capital
gains, because I think it is aslightly confusing topic for a
lot of people.
Let's assume in this scenariothat uh the house was sold for a
modest profit and factoring instamp duty and moving and all
(12:49):
the legals and etc.
etc.
they've broken even or theyWell, you can't factor in stamp
duty because it's not a tax.
No, but I just meant in the saleprice.
So let's assume uh they paid 3.1or 3.2, and with all of their
their sale price excluding allof the cost, the transaction
costs, they come out with aslight capital gain.
Let's say it's you know ahundred thousand or something.
(13:10):
Yeah.
Um, how how exactly do theycalculate the gain itself?
SPEAKER_02 (13:15):
Because I think rough, roughly 25% of of the um
of the gross capital gainprovided you haven't bought and
sold inside 12 months.
SPEAKER_01 (13:24):
Right.
And it's higher if you've doneit within 12 months, is that
correct?
SPEAKER_02 (13:26):
Because you've treated it as a trader rather
than um a capital um capitalgain.
SPEAKER_01 (13:31):
Yeah, okay.
Uh all right, and then outsideof primary place of residence,
are there any other factors thatminimize the capital gains uh uh
like levy or fee that you haveto pay other than it being your
primary residence or holding itfor a certain amount of time?
SPEAKER_02 (13:47):
No, the primary residence is a is a tax-free
sale, and that's why we've gotthis uh part in part reason why
we've got this massive wealthinequality in society at the
moment, because uh a lot ofpeople over a sustained period
have used that vehicle to createmassive gains for themselves,
and we've got baby boomers nowsort of selling down you know
(14:07):
assets that they paid 1.5million for, and they're selling
them down now for eight andeight and a half million.
And um, you know, there'sthere's essentially what's that
seven million dollars tax-freegain.
Yeah, what other area of theeconomy can you profit um by
seven million dollars and notpay a cent in tax?
And I'm not saying Bitcoinpre-2020, mate.
(14:29):
Um, well, I I wasn't in on that,unfortunately, but uh
unfortunately.
But um uh the the um the thepoint there being is that uh uh
it's a very, very generous um uhsystem that we have for for
homeowners that make a big gain.
And um unfortunately if youachieve a loss, you earn the
(14:51):
loss.
There's no so when you make aloss on your primary residence,
you can't write that off on tax.
SPEAKER_01 (14:56):
Yes, yeah.
But it yeah, if if most peoplein city property that have had a
house for any period of time,that's a highly unlikely
scenario.
SPEAKER_02 (15:05):
Well, look, I gave you one example in Hornsby.
No, that's the point of today'spodcast, right?
Is that there's a lot of peoplethat lose out there, um, and and
and and it's very painful.
So going back to one of thoseaccounts that we're talking
about, there's a Riverview househere um where they paid 6.5
million for it in December 2022.
(15:26):
Think of all the holding costs,the interest costs, beautiful
home.
Um probably spent teethingcosts.
Now, let me give you an idea ofuh stamp duty on 6.5 million.
I'll just quickly go to mycalculator here.
Substantial, regardless.
So just looking at that, Kieran,stamp duty on uh 6.5 million is
(15:47):
340,000.
Yeah, wow.
So that pushes the base price umuh of our uh subject property up
to uh 6.84 million, and thatparticular home um in September
2025, three years later, is onthe market with a fixed asking
price at 6.3 million.
SPEAKER_01 (16:07):
Wow.
So again, for the scenario,they're 500,000 behind just
before they even sell theproperty from where the value
was last time, and that excludesall the other things they talked
about the legals, the movingcosts, the agents fee on six and
a half or six point threemillion dollar property is going
to be substantial.
(16:27):
Uh so they, you know, ultimatelythey could walk away with quite
a bit less than six million,right?
Even at six point three.
Yep.
Yeah, that's a significant, uhsignificant cost.
SPEAKER_02 (16:38):
And I don't think so.
There's another one here.
I'll give you another goodexample here.
Uh one in Seaforth, um uh soldin September 2021, the peak of
the market, that bull market,3.19 million.
Uh it's just resold in September2025, four years later.
They made a gain, they sold formore than they purchased for.
They sold for 3.3.
SPEAKER_01 (16:59):
Yep.
SPEAKER_02 (16:59):
So that's obviously uh$110,000 more, but clearly
that does not even cover thestamp duty back.
And that's just about$160 odd,same as the other one.
So essentially, if you buy for3.19, you really need to sell
for 3.4 or better to be gettingyour money back.
SPEAKER_01 (17:18):
To break even.
Yeah.
To break even.
It's important for our listenersto break even at 3.4 to 3.5.
That's not to make profit.
And I I, you know, I actuallywonder how many people don't
realize that.
You know, when you buy aproperty and you think, oh,
look, I've been in it for anumber of years, we've paid into
the mortgage, etc.
Let's just sell and take all ourequity and buy something else.
(17:39):
There's probably not that muchequity at the end of it, you
know, depending on what yourrate is and how much you're
paying and all, you know, thereare other factors, but you know,
five years, ten years ofmortgage payments may not
actually have gotten you allthat much equity when you
consider all these other costs.
SPEAKER_02 (17:50):
Yeah.
Yeah.
So there's a massive cohort umin Sydney and across the Eastern
Seaboard of Australia that aresitting on massive tax-free
paper gains, and um, you know,they do become the subject of uh
criticism because they areenjoying these big massive uh
paper gains having bought in theearly 90s, say, and selling in
2025.
And um, yeah, it's essentiallyit's nearly the equivalent of
(18:13):
selling a company, a smallcompany, the profit um that
that's that's there for them.
Um, but equally, there are manypeople, like we've just outlined
with those examples, um, whohave purchased and resold for
around in percentage terms,around the price they paid, a
little bit more, a little bitless.
But you can see that thatbecomes a devastating um loss on
(18:35):
the bottom line when you takeall the transaction costs into
account.
And where I see this all thetime is um in the gossip
columns, uh, some celebrity willbuy a house for uh$7 million,
spend one and a half milliondollars renovating it and
selling it for$10, and they'resaying$3 million windfall.
And it's like there is no$3million windfall there, um,
(18:57):
they'd be lucky to be breakingeven or doing much better.
SPEAKER_01 (19:00):
Yeah.
Yeah, look very, very true.
Final question then for you,Peter, before we wrap up.
If uh any of our listeners outthere are in the process of kind
of selling, buying, whatever, isthere a good resource or a
person, uh, you know, an agentor an accountant or a lawyer?
Like who's the person to talkto, I guess, to get a better
understanding of all theelements involved?
(19:22):
Because obviously the agentshave their own uh things that
they're interested in, their ownbiases to a certain extent, you
know, conveyances have their ownexpertise area, but is there
like a good central resourcethat people can go to and get
all the info they need tounderstand all these costs
before they really commit?
SPEAKER_02 (19:37):
Uh there's not really, no, you've got to start
pulling it together yourself,yeah.
Yeah.
I say to people who are buyingand selling is that uh buying
and selling is a full-time jobas a consumer.
Um, but it's a job you didn'tknow you applied for, but you've
suddenly got when you're doingit.
And it's immensely distractingbecause you kind of do your,
you're still trying to do yourMonday to Friday job to the best
(19:57):
of your ability and what'srequired of you.
Um but you've got this otherhigh-stakes game of poker called
buying and selling real estatehappening on the side.
SPEAKER_01 (20:07):
Yeah, it's amazing the amount of people who say to
me, What do I need an agent for?
I could just sell my own house.
And I tell them, Well, you know,absolutely, mate, go for it
because there is so much morework involved and so much
complexity and so many layers oflegals and everything that you
don't even understand, uh, andyou still want to come to work
and do your normal job, youknow, best of luck.
It's uh it's hard.
SPEAKER_02 (20:27):
Yeah, it's a shame that the real estate industry
has uh got itself to a pointwhere it's trivialized like that
because the consumer doesn'trespect um, you know, the depth
of what's involved becauseagents are um you know too often
showing themselves on socialmedia as being, you know, all
flash and go.
But even the agents who aredoing it, the majority of them
(20:48):
behind the scenes are workingvery, very hard.
And uh, you know, the the theHollywood lifestyle that some
agents in the industry promote,um, it's either a complete
illusion or it's a tiny fractionof what their uh what their
working week looks like.
And it shocks people.
You've seen it yourself here inin in this business.
It shocks people who come inhere and think that uh uh real
(21:12):
estate is just standing at anopen house and someone says, I
want to buy it, how much do Ihave to pay?
SPEAKER_01 (21:16):
And and you get a free Mercedes or whatever.
Yeah, yeah.
It doesn't work like that.
SPEAKER_02 (21:20):
And then you come into the industry and they
realise the hours and themeticulous grunt work that need
needs to happen behind thescenes for a successful outcome
on the day.
SPEAKER_01 (21:29):
Yeah, look, I think that that's a whole other
discussion, but people certainlydon't appreciate how challenging
it is.
Look, uh really great chattoday, Peter.
Uh I you know appreciate thetopic.
I think it is a confusing one,uh, and one that we certainly
have, you know, we will exploreover time, and it will continue
to be a thing.
And I I certainly uh myself hopethat the government does find a
way to incentivise uh propertyexchange, because I think we do
(21:52):
have a lot of locked-upproperties that could be better
utilised if the government was alittle bit more kind of
supportive with uh with the waytaxation works, that's for sure.
But but uh I certainlyappreciate you coming in and
having a chat.
Thanks, Kieran.
And thanks for everyone forlistening to Current Market
Insights.
We look forward to speaking withyou next time.
SPEAKER_00 (22:09):
Thanks for joining us on the current market
insights public.
The public can must come in,realistically insummants, anyone
else.
Hello and welcome to another edition of Current
Market in Science.
I'm your host, Kieran O'Brien,and with me as always is Mr.
Peter O'Malley.
Peter, hello.
Kieran, great to see you.
Great to be with you again,mate.
Uh I want to talk today abouttransacting in real estate,
which uh, you know, strangely iswhat we do here on the podcast.
But I'd really like to take abit of a deep dive today into
(00:52):
what are the actual costsinvolved in transacting.
I think most people would beaware of the obvious ones, uh,
but I I know from my time andand you know my own purchase and
and other anecdotes and storiesand things around the industry
that there are costs that somepeople, particularly, you know,
if they're new or inexperiencedin the market, may not realize
(01:12):
are part of the transaction.
Uh so I thought today it mightbe a great idea for you to take
our listeners through what arethose hidden costs, or not
hidden, but what are thetransaction costs involved?
And what are some kind of tipsor strategies for people to uh
be aware of and in many waysmitigate or plan for those?
SPEAKER_02 (01:28):
Uh thanks, Kieran.
Look, I think people should beacutely aware that buying the
wrong property and having toresell it can end in disaster.
Now, when we say the wrongproperty, it can be the wrong
property because it doesn't meetyour needs, um, it's excess to
requirements, it's not bigenough for requirements, um, or
the mortgage is onerous and yourcircumstances change and you
(01:52):
need to resell the property.
And um, in instances where youpurchase a property and then uh
inadvertently uh find yourselfhaving to sell it within a short
time frame, um, you really needthe property market to have
risen 10% just to haveessentially broken even.
SPEAKER_01 (02:11):
Is that 10% regardless of market?
As in, you know, is it 10% inSydney, 10% in Hobart, 10% in
Brisbane?
You know, given that they're alldifferent house values.
SPEAKER_02 (02:21):
Everyone's got every state has its own stamp duty
formula, um, but uh it ends upat about the same percentage,
10% slightly overstating it, butthat's essentially what you need
the market to rise by afteryou've purchased a property just
to be in a break-even position.
SPEAKER_01 (02:40):
Okay, so we'll I'll get you to break down you know
what's involved in in making upthat 10%.
But one question I do have aboutyou know purchasing the wrong
property, I I have to wonderwhat I mean, this is not meant
to be the purpose of today'stopic, but how do people how do
they end up purchasing the wrongproperty?
I mean, what you know, what goesinto that as uh a process that
makes someone move in and go,actually, all of a sudden, you
(03:02):
know, we're two bedrooms shortor uh the mortgage is too high?
I mean, are these not factorsthat people that should should
be considered before thepurchase is done?
SPEAKER_02 (03:10):
Look, I don't want to be too harsh because change
of circumstances do happen.
Businesses go bad, people losetheir jobs, um, marriages fall
apart.
Um, so there's a range ofreasons.
And uh, you know, when you go onsocial media, um there seems to
be quite a few accounts um onTwitter particularly that sort
(03:32):
of take great delight um in uhyou know properties that sell
for less than the the ownerspaid.
And uh being a real estate agentand knowing what transaction
costs are, I I think if you takedelight in that, you're you're a
mongrel.
Yeah.
Because there's a real costbehind that, right?
There's a real human cost behindthat.
(03:52):
Like I'm looking at one examplehere up at Hornsby.
Um, to your point, I have noidea why would what would cause
them to trade like this, butthey purchased it in February
2025 for 3.27 million.
Stamp duty on um uh on 3.27million is somewhere in the
(04:13):
vicinity of$160,000,$161.862 tobe precise.
Yep.
They've just resold thatproperty in August 2025 for
$3,170,000.
So that's a loss from thepurchase price.
It's a hundred on the cleanhundred on the purchase price,
$161,862 on the stamp, so you'rea quarter of a million there.
(04:36):
Probably paid someone$60 to sellit.
Um so you're uh you're out to$320 odd there.
You probably paid moving costsin and moving costs out.
So let's just round that out at$10.
Um, you've probably paid umanother six or seven in legals,
um and and and I dare say you'vedone some improvements to the
(04:57):
property in the time that you'veowned it.
So a disastrous outcome headingtowards$400,000 loss, even
though the difference betweenthe purchase price and the sale
price was only$100,000 less.
Now, the most onerous cost whenit comes to transaction costs is
clearly and indisputably stampduty because since I joined real
(05:19):
estate, the stamp duty chart hasnever changed.
The higher the price, the higherthe percentage you pay in stamp
duty.
Yeah.
So that was just classic bracketcreep um buried into the stamp
duty equation.
So uh, for example, in 2000,when I sold my first house for
$420,000, um, I think the stampduty percentage then was about
(05:41):
3.8%.
That same house now recentlytraded for I think it was uh 2.1
million, 2.2.
Um, but stamp duty has a slidingscale, but the purchases would
have paid somewhere around fourand a half, heading toward five
percent stamp duty on that one.
SPEAKER_01 (06:01):
On a much higher price, yeah, for the same
property.
SPEAKER_02 (06:05):
So uh, and then if you go higher again when you get
into the three and the I thinkit's maybe five or six million,
you get further acceleratorswhere the stamp duty uh above a
certain price point kicks out tobeing seven percent.
SPEAKER_01 (06:17):
Yeah, wow, which is substantial, yeah.
SPEAKER_02 (06:20):
So um when you're talking these numbers, stamp
duty on at 161,000 on threethree point two seven million,
that's essentially five percentright there.
SPEAKER_01 (06:29):
Yeah.
No, it's certainly it's a bigchunk.
I mean, stamp duty is uh it'sone of those interesting topics,
right?
It's you know, my understandingof it is it was ceded by the
federal government to the statesas an incentive in the 60s or
70s, never really vanished.
The states have realized howvaluable it is to their coffers,
uh, and it is disproportionatelyuh disadvantageous, I think, to
(06:51):
to people looking to transact ina modern era.
Given, you know, this is a a bitof a segue, I guess, but given
that we uh in a housing crisisin Sydney, we don't have supply.
Do you think that there's evergoing to be any real like
movement on Stamp Duty to makeit more uh enticing for people
(07:11):
to downsize, for you know,transaction for the sake of in
many ways freeing up better?
You know, you talk often talkabout the the average
composition of the house and howmany people are are utilizing to
bedroom ratios and things likethat.
Do you think there'll everactually be government
incentives to to maximize thatequation and make it more
beneficial to everyone?
SPEAKER_02 (07:31):
Stamp duty.
Yeah.
Well, well, dom Dominic Perretaywent as far as introducing it,
didn't just talk about it, heintroduced it.
It was in for the last six orseven months of his government,
and then Chris Minnes tore it upas soon as he got into power.
SPEAKER_01 (07:46):
Yeah, this is the the lifetime kind of you know,
annual annual tax.
SPEAKER_02 (07:50):
Annual property tax as opposed to upfront stamp
duty, and it would havecollected more over time as an
annual property tax, but if thatwere introduced, it's a much
fairer tax spread over a longerperiod of time where um stamp
duty punishes those that aretrading and has all sorts of
unintended consequences and sideeffects as to how the property
(08:12):
market operates.
SPEAKER_01 (08:14):
Yeah, I wonder whether, you know, New South
Wales governments love to shootdown the other the opponent's
work and then redo it in adifferent format.
I wonder if Chris Mins as partof his housing reforms will ever
do something similar here.
Um, okay, so we talked about uhan example of transacting at a
loss and that being asubstantial kind of uh, you
(08:34):
know, or maybe an unexpected feefor uh those operating in the
market.
Um are you able to kind of talkto our listeners a little bit
about just what kind of makes upsome of the other costs?
I know you mentioned thembriefly.
There are some legals, there aresome agents fees, there are
some, et cetera, et cetera.
But uh outside of stamp duty,which we know can be a little
(08:55):
bit punitive, it is expensive,and it can be uh something that
a lot of buyers don'tnecessarily consider uh when
they come to market.
What are the major componentsthat do make up all of the kind
of transaction costs?
And are there stamp duty?
Are there any the buyers orsellers can, you know, kind of
work around or mitigate as partof the process?
SPEAKER_02 (09:16):
Uh well look about the only ones that you can
mitigate is moving costs.
You can hire a utility or a vanand move yourself.
Just yeah, muscle, muscle costs.
Good good luck with that.
Um I've done that many times.
And you and you can sell withouta real estate agent.
Um, can you get full marketprice?
Maybe, maybe not.
Um, a little bit like um beingyour own removalist.
(09:38):
Good luck with that.
Yeah.
Um, but essentially, uh, youknow, it would be ill-advised to
do your own legals.
It would be ill advised to areyou allowed to?
Is it like is your restrictions?
Yeah, if you make a mistake,it's on you.
Right.
Yeah.
Yeah, but you can self-act.
Highly ill-advised.
Yeah.
Yeah.
And the vendor's lawyer or theuh counterparty's lawyer will
(09:59):
probably end up having to coachthe person through because it's
just too complicated and it'd bea disastrous transaction.
But again, good luck with that.
So realistically, um, very fewpeople opt to sell their
property without a realtor.
Uh, very few people, even lesspercentage of people do their
own legals.
(10:20):
Um very few people, if any, dotheir own removal.
So, in theory, yeah, you can youcan reduce the transaction cost,
but in reality, not really.
So that's where I come back tothat point.
You can see if stamp duty isswallowing five percent straight
off the bat when you purchasethe property in transaction
costs, you can see it doesn'ttake much with everything else
(10:41):
that goes in it to run up to10%.
So when you do see a propertysell for a modest loss or even a
modest gain uh in real terms,that that that can often be a
nasty, uh nasty uh financialloss for someone.
SPEAKER_01 (10:56):
So, what about the one of the other components or
another major component thatcontributes to transaction costs
in capital gains?
So, you know, people that arenot transacting in their primary
place of residence uh activatinga capital gain event.
How does capital gains work inthose kinds of scenarios?
So let's assume uh, you know,for the sake of our our uh
(11:18):
example that the property inHornsby was an investment uh
bought for their children andthey had to sell for whatever,
you know, arbitrary notarbitrary, but whatever reason
they needed to sell for.
They've accrued this incredibleloss.
How does that factor intocapital gains?
Do they can they claim that as aloss?
SPEAKER_02 (11:35):
Yes and no, not all of it.
So stamp duty is not a taxdeductible expense for
investors.
Right.
So you you're you're wearingyou're wearing a clean half of
the transaction costs, whetheryou're an investor, an owner
occupy, you're wearing itregardless.
Yeah.
So there's no benefit there.
Yeah, if you've purchased aninvestment property and you sell
it for a loss, the agents feesand the legals on the way in and
(11:57):
the way out are a tax-deductiblecost.
Um, there'll be no moving costson an investment, of course.
And you can write off repairsand and and capital improvements
that you've you've you've madeon the property if you have done
any in that time.
So there is some taxation uhrelief, but all it's doing is
slightly minimizing the loss.
(12:18):
If you're paying tax, you'remaking a profit, and if you're
claiming a um, you know, uh atax deductible, carrying a
tax-deductible loss goingforward, well, you've still got
a loss of some description.
SPEAKER_01 (12:29):
Yeah, yeah.
So can you take out listers thenif if you're happy to?
An example of let's assume uhagain, just working with capital
gains, because I think it is aslightly confusing topic for a
lot of people.
Let's assume in this scenariothat uh the house was sold for a
modest profit and factoring instamp duty and moving and all
(12:49):
the legals and etc.
etc.
they've broken even or theyWell, you can't factor in stamp
duty because it's not a tax.
No, but I just meant in the saleprice.
So let's assume uh they paid 3.1or 3.2, and with all of their
their sale price excluding allof the cost, the transaction
costs, they come out with aslight capital gain.
Let's say it's you know ahundred thousand or something.
(13:10):
Yeah.
Um, how how exactly do theycalculate the gain itself?
SPEAKER_02 (13:15):
Because I think rough, roughly 25% of of the um
of the gross capital gainprovided you haven't bought and
sold inside 12 months.
SPEAKER_01 (13:24):
Right.
And it's higher if you've doneit within 12 months, is that
correct?
SPEAKER_02 (13:26):
Because you've treated it as a trader rather
than um a capital um capitalgain.
SPEAKER_01 (13:31):
Yeah, okay.
Uh all right, and then outsideof primary place of residence,
are there any other factors thatminimize the capital gains uh uh
like levy or fee that you haveto pay other than it being your
primary residence or holding itfor a certain amount of time?
SPEAKER_02 (13:47):
No, the primary residence is a is a tax-free
sale, and that's why we've gotthis uh part in part reason why
we've got this massive wealthinequality in society at the
moment, because uh a lot ofpeople over a sustained period
have used that vehicle to createmassive gains for themselves,
and we've got baby boomers nowsort of selling down you know
(14:07):
assets that they paid 1.5million for, and they're selling
them down now for eight andeight and a half million.
And um, you know, there'sthere's essentially what's that
seven million dollars tax-freegain.
Yeah, what other area of theeconomy can you profit um by
seven million dollars and notpay a cent in tax?
And I'm not saying Bitcoinpre-2020, mate.
(14:29):
Um, well, I I wasn't in on that,unfortunately, but uh
unfortunately.
But um uh the the um the thepoint there being is that uh uh
it's a very, very generous um uhsystem that we have for for
homeowners that make a big gain.
And um unfortunately if youachieve a loss, you earn the
(14:51):
loss.
There's no so when you make aloss on your primary residence,
you can't write that off on tax.
SPEAKER_01 (14:56):
Yes, yeah.
But it yeah, if if most peoplein city property that have had a
house for any period of time,that's a highly unlikely
scenario.
SPEAKER_02 (15:05):
Well, look, I gave you one example in Hornsby.
No, that's the point of today'spodcast, right?
Is that there's a lot of peoplethat lose out there, um, and and
and and it's very painful.
So going back to one of thoseaccounts that we're talking
about, there's a Riverview househere um where they paid 6.5
million for it in December 2022.
(15:26):
Think of all the holding costs,the interest costs, beautiful
home.
Um probably spent teethingcosts.
Now, let me give you an idea ofuh stamp duty on 6.5 million.
I'll just quickly go to mycalculator here.
Substantial, regardless.
So just looking at that, Kieran,stamp duty on uh 6.5 million is
(15:47):
340,000.
Yeah, wow.
So that pushes the base price umuh of our uh subject property up
to uh 6.84 million, and thatparticular home um in September
2025, three years later, is onthe market with a fixed asking
price at 6.3 million.
SPEAKER_01 (16:07):
Wow.
So again, for the scenario,they're 500,000 behind just
before they even sell theproperty from where the value
was last time, and that excludesall the other things they talked
about the legals, the movingcosts, the agents fee on six and
a half or six point threemillion dollar property is going
to be substantial.
(16:27):
Uh so they, you know, ultimatelythey could walk away with quite
a bit less than six million,right?
Even at six point three.
Yep.
Yeah, that's a significant, uhsignificant cost.
SPEAKER_02 (16:38):
And I don't think so.
There's another one here.
I'll give you another goodexample here.
Uh one in Seaforth, um uh soldin September 2021, the peak of
the market, that bull market,3.19 million.
Uh it's just resold in September2025, four years later.
They made a gain, they sold formore than they purchased for.
They sold for 3.3.
SPEAKER_01 (16:59):
Yep.
SPEAKER_02 (16:59):
So that's obviously uh$110,000 more, but clearly
that does not even cover thestamp duty back.
And that's just about$160 odd,same as the other one.
So essentially, if you buy for3.19, you really need to sell
for 3.4 or better to be gettingyour money back.
SPEAKER_01 (17:18):
To break even.
Yeah.
To break even.
It's important for our listenersto break even at 3.4 to 3.5.
That's not to make profit.
And I I, you know, I actuallywonder how many people don't
realize that.
You know, when you buy aproperty and you think, oh,
look, I've been in it for anumber of years, we've paid into
the mortgage, etc.
Let's just sell and take all ourequity and buy something else.
(17:39):
There's probably not that muchequity at the end of it, you
know, depending on what yourrate is and how much you're
paying and all, you know, thereare other factors, but you know,
five years, ten years ofmortgage payments may not
actually have gotten you allthat much equity when you
consider all these other costs.
SPEAKER_02 (17:50):
Yeah.
Yeah.
So there's a massive cohort umin Sydney and across the Eastern
Seaboard of Australia that aresitting on massive tax-free
paper gains, and um, you know,they do become the subject of uh
criticism because they areenjoying these big massive uh
paper gains having bought in theearly 90s, say, and selling in
2025.
And um, yeah, it's essentiallyit's nearly the equivalent of
(18:13):
selling a company, a smallcompany, the profit um that
that's that's there for them.
Um, but equally, there are manypeople, like we've just outlined
with those examples, um, whohave purchased and resold for
around in percentage terms,around the price they paid, a
little bit more, a little bitless.
But you can see that thatbecomes a devastating um loss on
(18:35):
the bottom line when you takeall the transaction costs into
account.
And where I see this all thetime is um in the gossip
columns, uh, some celebrity willbuy a house for uh$7 million,
spend one and a half milliondollars renovating it and
selling it for$10, and they'resaying$3 million windfall.
And it's like there is no$3million windfall there, um,
(18:57):
they'd be lucky to be breakingeven or doing much better.
SPEAKER_01 (19:00):
Yeah.
Yeah, look very, very true.
Final question then for you,Peter, before we wrap up.
If uh any of our listeners outthere are in the process of kind
of selling, buying, whatever, isthere a good resource or a
person, uh, you know, an agentor an accountant or a lawyer?
Like who's the person to talkto, I guess, to get a better
understanding of all theelements involved?
(19:22):
Because obviously the agentshave their own uh things that
they're interested in, their ownbiases to a certain extent, you
know, conveyances have their ownexpertise area, but is there
like a good central resourcethat people can go to and get
all the info they need tounderstand all these costs
before they really commit?
SPEAKER_02 (19:37):
Uh there's not really, no, you've got to start
pulling it together yourself,yeah.
Yeah.
I say to people who are buyingand selling is that uh buying
and selling is a full-time jobas a consumer.
Um, but it's a job you didn'tknow you applied for, but you've
suddenly got when you're doingit.
And it's immensely distractingbecause you kind of do your,
you're still trying to do yourMonday to Friday job to the best
(19:57):
of your ability and what'srequired of you.
Um but you've got this otherhigh-stakes game of poker called
buying and selling real estatehappening on the side.
SPEAKER_01 (20:07):
Yeah, it's amazing the amount of people who say to
me, What do I need an agent for?
I could just sell my own house.
And I tell them, Well, you know,absolutely, mate, go for it
because there is so much morework involved and so much
complexity and so many layers oflegals and everything that you
don't even understand, uh, andyou still want to come to work
and do your normal job, youknow, best of luck.
It's uh it's hard.
SPEAKER_02 (20:27):
Yeah, it's a shame that the real estate industry
has uh got itself to a pointwhere it's trivialized like that
because the consumer doesn'trespect um, you know, the depth
of what's involved becauseagents are um you know too often
showing themselves on socialmedia as being, you know, all
flash and go.
But even the agents who aredoing it, the majority of them
(20:48):
behind the scenes are workingvery, very hard.
And uh, you know, the the theHollywood lifestyle that some
agents in the industry promote,um, it's either a complete
illusion or it's a tiny fractionof what their uh what their
working week looks like.
And it shocks people.
You've seen it yourself here inin in this business.
It shocks people who come inhere and think that uh uh real
(21:12):
estate is just standing at anopen house and someone says, I
want to buy it, how much do Ihave to pay?
SPEAKER_01 (21:16):
And and you get a free Mercedes or whatever.
Yeah, yeah.
It doesn't work like that.
SPEAKER_02 (21:20):
And then you come into the industry and they
realise the hours and themeticulous grunt work that need
needs to happen behind thescenes for a successful outcome
on the day.
SPEAKER_01 (21:29):
Yeah, look, I think that that's a whole other
discussion, but people certainlydon't appreciate how challenging
it is.
Look, uh really great chattoday, Peter.
Uh I you know appreciate thetopic.
I think it is a confusing one,uh, and one that we certainly
have, you know, we will exploreover time, and it will continue
to be a thing.
And I I certainly uh myself hopethat the government does find a
way to incentivise uh propertyexchange, because I think we do
(21:52):
have a lot of locked-upproperties that could be better
utilised if the government was alittle bit more kind of
supportive with uh with the waytaxation works, that's for sure.
But but uh I certainlyappreciate you coming in and
having a chat.
Thanks, Kieran.
And thanks for everyone forlistening to Current Market
Insights.
We look forward to speaking withyou next time.
SPEAKER_00 (22:09):
Thanks for joining us on the current market
insights public.
The public can must come in,realistically insummants, anyone
else.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!