In Sydney, government taxes, levies, and compliance costs now account for close to half the price of a median-priced new home, representing more than $500,000 of the total cost. This trend is part of a broader national pattern where infrastructure expenses have increasingly shifted from general taxation to new housing buyers, significantly inflating home prices.

Research conducted by the Housing Industry Association (HIA) reveals that government charges constitute approximately 33 to 41 percent of the purchase price of a new home in Brisbane, and between 37 and 43 percent in Melbourne. These costs include a range of items such as developer levies, infrastructure contributions, stamp duties, goods and services tax (GST), environmental compliance, planning fees, and other administrative charges.

For example, a young couple purchasing a $700,000 house-and-land package in Brisbane may effectively borrow between $230,000 and $290,000 solely to cover embedded government charges. This situation results in homebuyers carrying debt accrued from taxes and levies on which they pay mortgage interest over decades, despite having already paid income taxes on the funds they borrow.

Experts argue that this layered taxation system is a significant driver of housing unaffordability, contradicting the narrative that high prices are primarily caused by market failures. They note that government efforts to improve affordability through first-home buyer grants, shared-equity schemes, and guarantee programs often have the unintended effect of increasing demand without addressing the underlying tax and levy burdens that contribute to elevated home prices.

Critics say governments should reexamine all levies and charges associated with new housing development to determine whether they are appropriate to impose on first-time buyers. Many of these expenses relate to infrastructure that benefits the wider community and thus should arguably be funded more broadly rather than disproportionately through new home purchases. The current approach of embedding high infrastructure costs within mortgages may obscure the true cost of housing but ultimately suppresses supply and restricts access to home ownership for younger Australians.

Reforms of this nature would require governments to reconsider a significant source of revenue. Nonetheless, analysts contend that addressing these embedded costs is critical to tackling the ongoing challenge of housing affordability in Australia.