The recently announced New South Wales Budget sets out some of the most strategic property related initiatives seen to date, with incentives aimed at improving housing supply and affordability rather than simply throwing money at the symptoms.
The most important announcement was that stamp duty, largely viewed as one of the most inequitable and inefficient taxes around, has been axed for those people purchasing a home ‘off the plan’ and under $600,000. An ‘off the plan’ purchase basically means buying the home before construction is completed.
At a consumer level the benefit is clearly in the stamp duty savings which could equate to as much as $22,490 on a home purchase.
The real strategic component in the announcement is the economic benefit that NSW is likely to experience from an improved housing development environment. The multiplier effect of housing construction is well documented (HIA have a great overview here). Every dollar spent on housing is leveraged almost three fold through increased levels of employment, manufacturing, resource extraction, materials fabrication etc.
Additionally, a new home purchased is generally accompanied by the purchase of new furnishing, white goods and often a new car.
There are a whole range of peripheral industries that benefit as well. Storage and transport services, insurance and financial services, machinery and equipment sales… the list goes on.
Other announcements in the budget are also likely to set a solid example to other state Governments. The capping on council charges for development at $20,000 provides a huge step forward. Previously development charges per block could be as high as $60,000 in NSW and there was very little consistency between councils and regions. The cap provides a vast improvement in the level of certainty surrounding development costs that will improve the developer cost forecasts which should make it easier to obtain finance from the banks.
This initiative should also enhance the ability of developers to deliver affordable blocks of land. Higher costs in most instances get passed on to the end user – the purchaser. With development charges slashed, developers should have scope to pass on these cost savings to the end user. So… a big tick for the NSW Government for taking an appropriate and strategic step forward in addressing the core problem of housing undersupply in the most undersupplied state in the nation. The Government is channeling demand into an industry that will provide the most highly leveraged economic outcome for the state as well as providing a solid leg up for consumers to buy into the most expensive market in the nation.
Your comment “An ‘off the plan’ purchase basically means buying the home before construction is completed” is not correct. The full stamp duty rebate (except for over 65s) only applies for contracts exchanged BEFORE construction commences. This will be a problem for spec builders and apartment developers alike.
Thanks Anthony, we stand corrected. A good run down on the NSW Builders Bonus can be found on the NSW OSR web site at this link: http://www.osr.nsw.gov.au/lib/doc/factsheets/ofs_hbb1.pdf The full rebate only applies before construction starts and a 25% rebate is available for homes already under construction or recently completed.
There has never been a better time to buy. With the prediction that the housing shortage will continue for years prices will inevitably move upward.