Stamp duty concessions just a small bone given revenue take
Property remains the NSW government’s remarkable revenue raiser despite the small bone the O’Farrell government has thrown the ailing residential development industry by way of its new home stamp duty incentive for first-home buyers.
This financial year the government will get $6.13 billion in property tax revenue. The longstanding $7,000 First Home Owner grant will continue to be available for all eligible first-home buyers. The total transfer duty exemption for eligible recipients – first-home buyers and others – is forecast as costing $803 million.
Meanwhile, existing NSW property investors could find 2012 a tricky year to exit the market, given the government’s decision to throw its weight behind new homes and units when it comes to stamp duties incentives.
The decision pulls the rug from underneath the sub-$600,000 established house and unit market, especially in the inner- and middle-ring suburbs.
The government saving is money that had previously underpinned the now-finely turned, and isolated, established housing market.
The change takes effect on January 1, 2012, so expect many erratic market distortions from today onwards as first-home buyers scramble to get the full $24,000 concession over the next few months.
Steering first-home buyers to spend their supposed entitlement to stamp duty concessions on newly built homes has merit, but don’t expect to see any stampede by the Y generation to new homes in the sticks or further afield.
The greatest impact will potentially be on demand in the inner-ring suburbs, where there are few new homes. The unit market pricing structure won’t be as affected, since new unit construction will take place in most suburbs across Sydney.
Angus Raine, the Raine & Horne boss, has slammed the state government's decision to cut the stamp duty exemption for first-home buyers purchasing existing homes in NSW, suggesting it will put even more pressure on overworked infrastructure in outer-Sydney suburbs.
"This is not going to help young people jump off the rental market treadmill and into their own homes," says Raine.
Stamp duty revenues hit $3.902 billion in the last financial year, which was above the $3.739 billion in the prior financial year, but below the envisaged $4.049 billion estimate.
Reflecting 7.3% annual growth, stamp duty revenues are expected to jump to $4.271 billion in the current financial year, then $4.723 billion and then $5.167 billion in 2014-2015.
Land tax revenues are tipped to rise by 6.9% annually over the forward period. Land tax revenues hit $2.289 billion in the past financial year, which was just below the $2.296 billion in the previous financial year, and below the envisaged $3.282 billion estimate.
Land tax revenues are expected to jump to $2.482 billion in the current financial year, then $2.643 billion then $2.813 billion and then $2.987 billion in 2014-2015.
The revised First Home Plus and First Home Plus One schemes will provide a full transfer duty exemption for eligible first home buyers purchasing a newly built home costing up to $500,000 and partial transfer duty exemptions for homes costing between $500,000 and $600,000.
NSW Treasurer Mike Baird expects restricting the schemes to newly built homes will enhance incentives for new home construction.
“Over time, an expanded supply of homes will help to improve housing affordability for all home buyers,” Baird says.
In the past year 32,600 first-home buyers secured concessions totalling $587 million.
