5 October 2011
The NSW Governments decision to limit first home buyers stamp duty concessions to newly built homes from 1 January 2012 has been welcomed by the Urban Taskforce. The Taskforces chief executive, Aaron Gadiel, said the $1 billion revenue measure was a sensible step that would help boost NSWs supply of new housing.
This reform will remove the current schemes inflationary impact on home prices, and will make more housing available to more people, Mr Gadiel said.
This is good public policy.
Mr Gadiel said that existing first home buyers stamp duty concessions have been poorly targeted for far too long.
NSWs housing supply has been heavily constrained by the planning system and high development levies, he said.
This has made NSW a very expensive place to build new homes.
With the costs imposed by the planning system, developers simply cannot build enough new homes at a price that is competitive with the existing stock of housing.
In our supply constrained home market, the existing first home buyer stamp duty concessions inflate home prices across the board.
But this hasnt addressed the high cost of supplying newly built homes to the market.
By tying stamp duty concessions exclusively to new housing, the inflationary impact on existing housing will be removed, and brand new homes will be more attractive to home buyers.
This will help make up for the high costs embedded into each new home by the inefficiencies of the planning system and excessive development levies.
This improves the financial viability of NSW home development and will make it easier to secure capital for new residential projects.
Mr Gadiel said that NSW was currently building 45 homes a year per 10,000 residents.
Victoria, Western Australia and the ACT produces more than double the number of new homes per person, he said.
Queensland and South Australia produces one-and-a-half times NSWs number.
Tasmania and the Northern Territory exceed our per capita rate of housing construction by more than 25 per cent.
This scheme is a significant step forward in addressing this imbalance, although, it will only cancel out a small part of the massive costs imposed by an inefficient planning system.
Mr Gadiel said that, while he welcomed the amended scheme, the thresholds for the schemes operation were too low.
The concession reaches its maximum rate at $500,000 and ramps down so that there is no benefit when a first home buyer purchases a home valued at more than $600,000.
The existing first home owners grant applies to dwellings up to $835,000 in value, Mr Gadiel said.
Were surprised that this benchmark hasnt been used for the amended schemes.
For example, first home buyers with young children will struggle to find a three bedroom apartment in Sydney priced under $600,000.
The budget papers say that the better targeting of the First Home Plus and First Home Plus One schemes will raise the government an extra $1.049 billion over four years.
This money should be set aside to help fund urban infrastructure essential for growth, Mr Gadiel said.
This budget clearly places a great emphasis on growth infrastructure, particularly with the $600 million allocated to the North West and South West rail links.
However, nothing in the budget paves the way for a reduction or abolition of development levies on new homes and business premises.
In particular, there is a need for massive investment in road infrastructure across the major growth regions of NSW.
The $2.4 billion investment across all of NSW in new roads is modest, when compared with the likely $8 billion to $12 billion cost of the North West Rail Link alone.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
