Limiting scheme described as "unjust"
The Real Estate Institute of New South Wales has responded to the NSW budget, handed down Tuesday. REINSW said it welcomed the budget’s focus on housing affordability, but that the government is missing several opportunities, including addressing the supply shortage and stamp duty bracket creep.
REINSW CEO Tim McKibbin said that the reforms benefit only first-home buyers among domestic purchasers, making them too narrow in scope.
“The measures announced in the budget apply only to first-home buyers – and in the case of the shared equity reform, only to those in select occupations,” McKibbin said. “Limiting the shared equity scheme to a specific group of people seems unjust, and there might be some market distortion.”
McKibbin said that the sub-$1.5 million segment of the market could come under additional pressure if the reforms spur an increase in first-home buyer demand.
“Of course, the market’s inability to meet already strong demand with sufficient supply is the crux of the affordability problem,” he said. “There is nothing in these proposed reforms which address the critical shortage of supply. The REINSW renews its call for government to focus on the supply side, as this has the greatest potential to contribute to an improvement in affordability.”
McKibbin also commented on the budget’s proposal to offer first-home buyers a choice between paying stamp duty or an ongoing property tax.
“For a first-home buyer looking for an entry-level property, there’s an opportunity to buy a home without paying the stamp duty,” he said. “At face value, this is positive news, as it means they’ll have more money to spend on the property itself, making them more market competitive. However, if the first-home buyer is buying their ‘forever home,’ then this option becomes less attractive.”
McKibbin said first-home buyers should also keep in mind that no stamp duty is payable for property costing less than $650,000, and reduced stamp duty is payable for property costing between $650,000 and $800,000.
“For first-home buyers in the market now, the question is, ‘Should I wait for the reforms to kick in?’” he said. “They may be eligible for a stamp duty refund but would still need to fund the stamp duty at the point of purchase. In the immediate term, it may create some hesitation.”
McKibbin also criticised the limited scope of the government’s shared equity scheme.
“We see this as more of a political move than an affordability solution,” he said. “Its potential impacts as an affordability reform are questionable, as its scope is clearly limited in relation to the occupations it applies to – who must also be first-home buyers. Nevertheless, the shared equity scheme represents a means whereby some first-home buyers will be able to enter the market when they otherwise wouldn’t have been able to.”
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However, McKibbin said the scheme raised some “practical questions.”
“For instance, could a person be eligible for both the shared equity scheme and the stamp duty exemption?” he said. “Does a person who acquired a property using the shared equity scheme have to pay all the outgoings? Will that person have to pay all of the stamp duty or property tax under the scheme? Consider a first-home buyer who purchases a new property for $1.083 million under the shared equity scheme. Given they will have only a 60% interest in that property, valued at $650,000, do they pay no stamp duty?”
McKibbin said the proposal also raised questions about improvements made to a home purchased under the scheme.
“If the occupier makes improvements and maintains the property, is that contribution calculated in the division of the sale price when it comes time to reimburse [the] government’s stake?” he said. “As the drafting of the legislation begins, there will likely be other questions to arise, so it will be critical for government to consult the industry and stakeholders in developing these policies.”
McKibbin also said the budget “misses an opportunity” to update stamp duty brackets for all purchasers.
“Over the past 20 years, Sydney’s median house price has increased 280%, from approximately $418,000 to $1.59 million,” he said. “Over the same period, the stamp duty payable for a median-priced house in Sydney has increased 406%, from $14,300 to $72,400.”
McKibbin said that, ultimately, the budget’s reforms didn’t go far enough.
“For the overwhelming number of property consumers, nothing changes,” he said. “This reform is clearly not the generational change it was touted to be.”
