After raising land value tax rates in an Australian territory, the typical new home buyer will save between $1,000 and $2,200 on mortgage payments.

“We see evidence of mortgage savings from the lower prices in Canberra…where the size of average new home loans in ACT has grown far less than the other major States since the tax reforms began. Average loan size is up approximately 9% in ACT since July 2012, while the mean increase for other states is 14% (or 19% excluding Northern Territory and Tasmania). With average loan size now $364,000 in the Territory, this data suggests that the capitalisation of land taxes into prices may have led to a reduction in average mortgage size in the Territory in the range of $18,000 to $37,000. In terms of annual mortgage costs, this represents a saving of between $1,000 and $2,200 per year for the average home.”

empirical