The NSW Budget 2018–19 was released by NSW Treasurer Dominic Perrottet on Tuesday (19 June) and revealed that the government will spend around 2.6 per cent of the budget (approximately $1.18 billion) in 2018–19 on housing and community amenities, “reflecting its priority to create strong and vibrant communities, enhance environmental protection, ensure energy and water security and improve liveability”.
Of the allocations specified, the NSW government will provide:
- more than $287 million in the next five years for expanding and enhancing open spaces and parklands
- $61.7 million over four years in new funding to implement the NSW Homelessness Strategy 2018–2023 to support programs including Staying Home Leaving Violence, sustaining tenancy supports, social impact investment and transitional accommodation
- $37.0 million in 2018–19 to accelerate and extend the roll-out of the Easy to Do Business Program in cafes, restaurants and small bars, and the housing construction sectors in New South Wales
- $33.1 million over four years for the Aboriginal Social Housing Strategy to deliver innovative housing solutions, support for Aboriginal people and build the Aboriginal community housing sector
- $15.0 million New South Wales contribution to a $30.0 million Western Parklands City housing package
The NSW government also confirmed that it has established the NSW Productivity Commission, which is tasked with:
- lowering the cost of living
- making housing more affordable
- making it easier to do business
- making New South Wales the easiest place to move to
Peter Achterstraat AM has been appointed as the inaugural Productivity Commissioner.
Despite calls for a revision of the current stamp duty model, the budget did not unveil any new measures on this matter.
However, it did note that since the government announced its package of reforms last year (which abolished stamp duty for first home buyers for properties valued up to $650,000, reduced stamp duty on homes up to $800,000 and abolished duty on lenders’ mortgage insurance), more than 30,000 first home buyers received stamp duty concessions and exemptions worth around $435 million.
The number of first home buyers is also said to now be more than 3.5 times higher than in the same period in 2016–17.
The budget showed that where first home buyer concessions made up around 6.7 per cent of property transactions worth less than $800,000 during 2016–17, their share of the total residential transactions within this price range has now risen to around 25.4 per cent.
“Housing cooled more quickly than previously forecast”
Releasing the budget on Tuesday, Treasurer Dominic Perrottet said: “Over the past 12 months, housing cooled more quickly than previously forecast. As a result, transfer duty revenues — 11 per cent of total revenue — will be $1 billion lower than we expected in last year’s budget, and $5.5 billion lower in the three years to 2020–21.
“The loss of momentum in the housing market is expected to see house prices remain soft over the next two years, weighed down by tightening credit conditions and a smaller undersupply. Regulatory changes targeting investors are impacting conditions in New South Wales, where investors account for a high share of housing finance. In the meantime, strong population growth, housing undersupply and historically low interest rates will continue to lend some support.”
The Treasurer notes that domestic risks centre around the housing market, the outlook for wages over the next two years and “their potential flow-on to household consumption”.
He noted that several factors could see conditions in the housing market deteriorate more than expected, including additional tightening of lending standards “heightened by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry”.
However, the Treasurer has said that the government will be engaging with the industry and community stakeholders to “help identify opportunities to improve housing market productivity and responsiveness, which will in turn improve housing affordability”.
Notably, this could include measures that improve flexibility and clarity in the planning system and explore new opportunities such as Build to Rent, a “nascent sector” which the Treasurer said could have the potential to “improve security of tenure and customer service for renters by supplying new housing designed and held specifically for long-term rental use”.
It is therefore considering feedback from a Build to Rent Working Group, overseen by Property NSW and comprising government and sector representatives, to assess options for reform.
Several industry commentators have voiced disappointment over the lack of housing initiatives in the budget, with the Real Estate Institute of New South Wales saying that it was “disappointed” by the lack of action to “address stamp duty rates”.
REINSW CEO Tim McKibbin said: “The number of transactions has fallen and will continue to fall because people aren’t buying and selling real estate.
“The budget forecasts $6 billion less than previously budgeted in stamp duty over the next four years but an increase by $407.6 million in land tax from stronger forecasts for land values.
“Taxation is driving the market into the ground. It is fiscally naive, irresponsible and unconscionable not to reduce the stamp duty rates.
“After it has all been said and done, there has been more that has been said than done. We need action, not words.”
The REINSW therefore called for a “full review of property taxes”, in particular stamp duty brackets.