A proposal to replace stamp duty concessions with a $25,000 grant for first homebuyers in New South Wales as part of a wide-ranging property tax reform has been criticised as missing the mark and is not likely to fully address the state’s affordability issues, particularly in Sydney.
NSW Treasurer Dominic Perrottet this week released an update on the state government’s tax reform progress, which centres around giving buyers the choice to pay up-front stamp duty or a new annual property tax.
Part of the update was a proposed $25,000 grant for first homebuyers, which would replace current exemptions on paying stamp duty for new homes worth less than $800,000, or established homes worth less than $650,000.
For new houses valued between $800,000 and $1 million, and existing homes valued between $650,000 and $800,000, first homebuyers are currently offered stamp duty concessions.
Real Estate Institute of NSW chief executive Tim McKibbin welcomed the update, but said a property tax alone hardly constituted reform.
“The issues facing the property sector, not least the housing crisis in New South Wales, require holistic reform with the capacity to deliver meaningful change,” Mr McKibbin said.
“The Property Services Council Bill 2021 is just that.
“Set to be debated in the Legislative Assembly next week after being passed in the Upper House, the proposed regulatory environment and competencies of this authority would provide a conduit for government to access and inform itself in the development of contemporary policy decisions and solutions.
“At long last, it’s an opportunity for genuine reform. The many issues affecting the industry which demand a more appropriate regulatory response, from supply, affordability, agent education, consumer protection and more, will be put under the microscope with the opportunity for an industry-experienced regulator to deliver better outcomes for everyone.
“The government’s plan to block it doesn’t pass the common sense test.”
Buyers agent Shuai Luo, founder of Barangaroo-based Avocado Wealth, was similarly dismissive, saying the new $25,000 grant would make affordability worse.
Mr Luo said many first homebuyers would be excited at the opportunity to access additional funds to put towards a property purchase, but the changes would have several wider impacts on the Sydney property market.
“It seems the first home buyers would have $10,000 plus $25,000 cash, which is $35,000 in total, sponsored by the government to pursue their Australian dream, which sounds fantastic,” Mr Luo said.
“But if stamp duty is scrapped, it will have a very subtle change to all buyers in the market, not only the first home buyers.”
Mr Luo said an example of that wider impact would be a family planning to upgrade to a $1 million house with a 20 per cent deposit, plus 5 per cent for additional fees such as stamp duty.
“If NSW scrapped stamp duty, (this family) would not need to pay about $40,000 stamp duty,” he said.
“This would give them an extra $40,000 put into the deposit. So they would now have a $240,000 deposit instead of $200,000.
“And what does $240,000 mean? If his family income is allowed, and he is still preparing to have 80 per cent of loan to value ratio (LVR), he could now be able to purchase a home for $1.2 million
“So, when the stamp duty is removed, it does not necessarily mean the buyer would save the money to do something else.
“From the current market, what we have learned is that, the buyers would pay what they have to pay to buy the best homes they could reach.”
Mr Luo said that increased buying power across the market would have a negative impact on housing affordability.
“I don’t think the government has a clear plan to really help the first home buyers get affordable homes,” he said.
“They are thinking about something else – state revenue.”
Property Council of Australia NSW executive director Jane Fitzgerald said other aspects of the tax reform proposal, including new higher property taxes for residential and commercial investors, would need to be finely balanced.
“The threshold for residential owner occupiers has been lowered while residential investors are now proposed at a rate 0.1 percent higher than outlined in November,” Ms Fitzgerald said.
“Landowners with holdings above $1.5 million (unimproved value) would be subjected to a new 0.3 percent surcharge.
“The higher the reform model pushes tax rates on commercial properties, the less likely they will be to opt into this new system and the opportunity to deliver the broadest reform dividend will have been missed.
“Getting this balance right is a critical next step.”
