New South Wales’ struggling construction industry has received a major boost through measures for first homebuyers and purchasers of new properties announced in yesterday’s state budget.
Along with a doubling of the first homebuyer grants to $15,000, NSW Treasurer Mike Baird announced an increase in stamp duty exemptions, and a new grant of $5,000 to all non-first homebuyers who purchase new properties worth up to $650,000.
“This innovative and comprehensive package provides a shot in the arm for the NSW housing industry, bringing forward investment for critical infrastructure to directly tackle the housing shortage across our state,” Baird said in a statement announcing the measures.
“For too long the NSW housing sector has been dormant, at a significant cost to the people of NSW and our economy.
“This budget demonstrates the NSW Government’s commitment to addressing the state’s housing shortage, kick-start housing construction sector and get more people into new homes sooner.”
The budget provides $561 million of new money to boost housing construction, including $481 million to fast track critical infrastructure needed to support housing across the state, particularly in greenfield areas through the Housing Acceleration Fund.
An additional $30 million is part of the package for the Local Infrastructure Renewal Scheme to facilitate over $1 billion of new local infrastructure, and there is an Urban Activation Precinct Policy which includes $50 million of incentives for local councils to build essential infrastructure.
Housing Industry Association chief economist Harley Dale told SmartCompany this morning that the budget’s emphasis on new homes rather than existing property via the first home buyer grant was a good move.
“I think the decision to focus investment on new housing is a smart one. To the extent that it is pretty much a no brainer really, as the new home building sector in NSW has been underperforming for a decade now and it is a major reason why the state’s economy has been underperforming,” says Dale.
“The NSW housing sector is the most heavily taxed in Australia and new housing is the second most heavily taxed sector in the Australian economy. So there are a lot of taxes that make new home building quite expensive.”
The HIA expects to see a lift in new home building activity in NSW in the 2012 and 2013 financial year on the back of the budget.
“The question will be the magnitude of any recovery in new home building and that comes down to reform in other areas like the planning system and ensuring land supply is adequate and timely and addressing high infrastructure charges levied on housing development,” says Dale.
He says that the provision of funding for infrastructure in the budget is also a “tick in the box” for NSW’s housing construction industry.
“I think it is encouraging that there has been some money allocated for residential infrastructure. This is the area that is a real thorn in the side of the new home building industry in NSW and a lot of the infrastructure costs have been going onto the new home buyers.”
However, the state’s peak real estate body, the REINSW, is critical of the budgetary measures and says the government had failed to respond to the real challenges facing the market.
“It is good that they have acknowledged that the property sector is the engine room of the economy, [the budget] will be received positively in the construction industry and that is where the incentives have been placed,” REINSW president Christian Payne says.
“But the incentives will only capture a small part of the property sector, so the missed opportunity is that it needs to be across the board for all property transactions.”
Payne pointed to the absence of stamp duty reform, the lack of incentives for purchasers and sellers of existing property and the failure to kick start the investment sector as “real failings” of the budget.
“There was nothing in it for investors. They will be $17,490 worse off on a purchase of $600,000 ‘off the plan’ property, so that does not attract property investors back into the NSW market, which it really needs,” says Payne.
Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
