INDUSTRY NEWSNEWSNSW

NSW Budget helps certain sectors of the property market

The NSW Government’s stamp duty reform, shared equity scheme and housing infrastructure boost are all positive starts but don’t stretch far enough to make a meaningful, long-term impact on the property market, according to industry experts.

NSW Treasurer Matt Kean handed down his first State Budget today and while much of the spending on real estate-related items had already been personally lauded, property experts on the ground were a little less impressed.

Stamp duty reform

Richardson & Wrench Managing Director Andrew Cocks said the state’s stamp duty reform was positive for first-home buyers but would not encourage older people in large homes to downsize.

Under the new First Home Buyer Choice package, from 16 January 2023 first home buyers will be able to choose between an upfront payment or a smaller annual property tax of $400 plus 0.3 per cent of the land value of the property on homes valued at up to $1.5 million.

Premier Dominic Perrottet said one of the State Government’s priorities was to make home ownership a reality for more NSW families.

“We want to lower the barriers to owning a home for first home buyers seeking a place of their own,” he said.

“In the past two decades, the share of first home buyers under 35 years of age has declined from 67 per cent to 61 per cent. Lifting home ownership is part of this government’s efforts and ambition to help families who are feeling the squeeze.”

But Mr Cocks said he was concerned the reforms were a “drip feed”.

“I don’t think it’s going to impact on a lot of the liquidity issues that you see for larger properties,” he said.

“That’s where a lot of the inertia sits within the marketplace, where people will stay in a four or five-bedroom home. If they’re in Sydney, it’s going to be well above the $1.5 million cap, so it’s not going to be eligible for first home buyers to buy it even if they could afford it.

“You’re going to get a lot of people just sitting on property because anywhere else they’re going to go to is going to attract stamp duty.”

Andrew Cocks

Mr Cocks said he understood the NSW Government could not fund full stamp duty reform on its own, but he said the new scheme would not change market dynamics.

“I understand the limitations they’re working under but it really does seem like a short-term or band aid solution,” he said.

Real Estate Institute of NSW President Peter Matthews said when it came to stamp duty, only time would tell if it assisted first home buyers.

“It’s either a tax now or a tax later and what will that payment deferral mean?” he questioned.

“Will it give a first home buyer more firepower, or will that result in a buyer not necessarily getting that saving upfront but putting more into the property than what they naturally would have given it would have been an upfront impediment?

“And given it’s only a small sector of the whole market, will it actually have the impact the government is looking for?”

Peter Matthews

Mr Matthews said the stamp duty reforms also didn’t address the issue of supply.

“That’s in relation to improving density and providing incentives for property owners that are holding on to their assets longer than what they should because they’re not being incentivised to sell them,” he said.

“Anything that can provide value to first time buyers to get into the property market is a positive step in the right direction, however unless we actually address the real issue, and that is supply, then it’s not going to have a massive impact on affordability.”

The Agency Chief Executive Officer Matt Lahood said the stamp duty reform was still a tax that needed to be paid in some form and it would have an impact on the lower, first home buyer end of the market.

“We will definitely see first home buyers come back into the market because this is an advantage,” he said.

“Even though interest rates are going up, they’re not going up enough to offset an amount of stamp duty that is payable on a first home purchase.

“I personally don’t think it will affect pricing but it will definitely affect the ability to purchase in a positive way for certain segments of the market.

Matt Lahood

PropTrack Economic Research Director Cameron Kusher said the scheme targeted only the smallest cohort of buyers but it was positive that it now covered existing homes.

“Looking at previous NSW government schemes, stamp duty free purchases or reduced stamp duty had already been available to first home buyers that purchased new homes, while this new scheme is applicable to new and existing homes,” he said.

“The focus that NSW and other state governments have on stamp duty waivers or reductions is an indication that stamp duty is a barrier to market entry for first home buyers. It is also a barrier to market mobility for existing homeowners.

“Given the new scheme is an option for homes up to the value of $1.5 million, there is an opportunity to extend this to subsequent purchasers and investors too.”

REA Group Director of Economic Research Cameron Kusher
Cameron Kusher

Mr Cusher said higher priced properties being excluded from the scheme reduced revenue loss to the government, and buyers in price brackets above $1.5 million were likely to select stamp duty over the property tax.

“Property prices are already slowing in NSW and it is the higher priced properties that are seeing the greatest falls,” he said.

“A scheme such as this is likely to provide some more support for cheaper properties, however, the impact is likely to be fairly minimal given the stronger market forces at play and the further increases in interest rates which are expected. Hopefully this is the first step to broader stamp duty reform in NSW.”

Shared equity scheme

Under the NSW Government’s shared equity scheme, teachers, nurses, police, single parents and older singles will be able to tap into a $780.4 million shared equity scheme to buy a home.

The scheme will see the NSW Government contribute an equity share up to 40 per cent for a new property or up to 30 per cent for an existing property purchased by eligible buyers.

It will be available to key worker first home buyers who are nurses, teachers or police, as well as singles aged over 50, and single parents with a child or children under 18.

As many as 3000 spots will be available each year for two financial years.

Mr Cocks says the initiative is a positive one but was “very specific and niche”.

“If you look at the overall number of properties or people that they’re talking about, it’s only a tiny proportion of the overall property market,” he said.

Participants must have a gross maximum income of $90,000 for singles and $120,000 for couples, with a minimum 2 per cent deposit.

The maximum value of a property that can be purchased is $950,000 in Sydney and regional centres including the Central Coast, Illawarra, Lake Macquarie, Newcastle and the North Coast of NSW, and $600,000 in other parts of NSW.

Mr Cocks also questioned whether the scheme would be available to all buyers in the chosen cohorts, such as private sector teachers.

“If it is successful, and the politicians and the policymakers find it’s easy to implement, and it’s not going to distort the market, then you can expect it will be something that will be offered up in the future,” he said.

“But at the moment, fundamentally, I don’t think it’s going to change the marketplace. It’s not going to have a big impact just purely because the numbers are so small.”

Mr Lahood said market concerns that the shared equity scheme would see the State Government not just own part of a buyer’s home but part of the profit when they sold would be “nebulous” as the changing market was heading towards a period of no or low growth.

“There’s tailwinds, headwinds and no winds in real estate and we’re heading into a no wind situation for the next number of years so that growth might be nebulous,” he said.

“If people use the shared equity model to get into a property they couldn’t otherwise get into, I wouldn’t be too concerned about the government sharing in the upside because there’s probably not going to be a lot of upside across the country in the next five years.”

Funding for housing supply

The NSW Government has also committed almost $500 million to unlock land and accelerate housing infrastructure in a bid to enable hundreds of thousands of new homes to be built across the state.

“This is about getting keys in doors with this commitment supercharging housing supply to help people across the state get one step closer to home ownership,” Mr Perrottet said.

“We know one of the biggest constraints on housing supply is a lack of supporting infrastructure like water, roads, sewers and parks. So we are rolling out a $300 million investment to help councils deliver the projects that help grow our communities.”

Mr Kean said the housing package would also include $89 million to aid faster planning assessments, $69.8 million to accelerate the rezoning of key housing precincts in Sydney and regional areas to make more land development-ready, and $3.8 million for a ‘call-in’ team for faster council-led rezonings.

There will also be $33.8 million to address housing supply in regional NSW and to create a 10-year regional housing supply pipeline.

“Prioritising planning assessments for new homes will make it faster for high quality planning proposals to be approved,” Mr Kean said.

“We are anticipating hundreds of thousands of homes will be delivered sooner, through faster state and local rezonings and approvals.”

Mr Cocks said the big issue Australia currently faced is that the development cycle has effectively had a two-year hiatus.

“There’s certainly sites that are opening up and starting to be built but the whole development infrastructure delivery cycle was significantly disrupted and that’s not something you can turn around quickly,” he said.

“The problem we’re going to face, certainly for the foreseeable future, is that we’ve got very high demand in lots of parts of the country.

“A lot of new people are coming into the marketplace as skilled migration and overseas migration start to increase again. I think they are talking about ramping up to about 200,000 (people) a year, which is well above the 140,000 a year they’ve historically had. 

“So we’re going to have these huge numbers of people coming in but without the supply.”

Mr Matthews said any initiative that furthered land subdivision and density was a positive step but he cautioned that didn’t automatically mean councils would speed up their approvals processes.

“Once rezoning has happened, you’ve then got to get an approval through and in some instances there are councils that are taking a number of years to get those approvals done” he said.

“It’s about undoing a lot of the red tape that is in place and money doesn’t necessarily unwind that or remove it.”

The Property Council of Australia welcomed the NSW State Budget with its focus on housing supply and affordability.

Property Council NSW Executive Director Luke Achterstraat said announcements on housing supply measures, stamp duty and shared equity schemes were clear indications the government had put housing at the top of their priorities.

Mr Achterstraat said the $500 million committed to address housing supply would deliver more jobs and homes for the residents of NSW at a time when housing affordability concerns remained at high levels.

“Improving the planning system and delivering more housing supply are the biggest levers the state government has to address affordability,” he said.

“We are some 100,000 homes short of where we need to be in NSW so it is timely to support the private sector in getting on with the job of building quality homes and beautiful communities for the people of NSW.”

Mr Achterstraat also welcomed the recognition and funding for infrastructure.

“There is an enormous difference between land that is simply rezoned and land that is ‘development ready’ – the missing ingredient is enabling infrastructure such as water, parks and transport,” he said.

“The $300 million earmarked for enabling infrastructure needs to be delivered strategically and efficiently.”

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Kylie Dulhunty

Kylie Dulhunty is the Deputy Editor at Elite Agent.