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NSW Government could reap hundreds of millions of dollars in revenue, simply by cutting stamp duty

The NSW Government should back RBA interest rate action by cutting stamp duty to kickstart sluggish property market.

In the wake of the RBA’s decisive action to shock the economy into a higher gear, the NSW Government is being called on to do its part to kickstart a sluggish property market.

And in a bold plan, we are urging the government to cut transfer stamp duty not just to increase sales activity but also to increase government revenues.

A cut to transfer stamp duty rates of as little as 0.5% could boost state revenues by hundreds of million dollars through aggressive stimulation of the property market; a move that has been proven to work elsewhere in Australia.

The plan is based on focused research on reductions in property transfer taxes in Western Australia, the Northern Territory and New South Wales that resulted in sharp increases in government revenues as a result of a dramatic escalation in property transactions.

The Reserve Bank’s recent action is a clear sign that the economy has entered an uncertain phase and is in need of urgent stimulation. What we need in NSW is equally decisive and innovative action from the State Government to not only increase property transactions, but also to protect state government revenues.

We know from the bitter experience of the vendor duty that when you raise property transfer taxes you get a decline in government revenues.

In NSW, a 2.25% vendor duty resulted in a loss of over $1 billion in transfer duty in the only full year it was in operation. Importantly, in the first full year after the removal of the vendor duty, transfer duty went up by over $1 billion.

Between 2003 and 2006, Western Australia cut property transfer duties by 0.9% yet related revenues rose by more than $709 million over the same period, simply because the cut stimulated in the market.

Similarly in the Northern Territory, property transfer duty rates were cut by 0.45% which resulted in an increase of more than $22 million in related revenue.

Put simply, increasing taxes means less money for government, decreasing taxes means more money for government!

While the cut in official interest rates is welcome, stimulation of the property market can’t just be left to the Reserve Bank.

The NSW Government needs to heed the warning of declining property transactions which is cutting into state government revenues now and in the future.

Between 2003 and 2011, total dealings have fallen by more than 289,000 despite an increase in population.

Our plan to cut transfer duty is a proven model to protect government funding sources and at the same time, light the badly needed spark to get the property market really moving again.

The evidence is clear that additional stimulation of the market is generated by an easing of property transfer duty rates, providing greater incentives for buyers and at the same time, protecting revenue streams for government.

The global economy remains in a dangerous phase and the impacts on Australia and NSW are uncertain.

What we learnt from the GFC Mark I is that it was only innovative and coordinated policy action by governments across Australia that helped sustain and invigorate the property sector, which is the engine room of the national economy.

Already we have seen the Reserve Bank take immediate and urgent steps to cut interest rates in order to stimulate activity.

These cuts need to be reinforced by additional and wide ranging policy responses such as our Stamp Duty Plan.

Action needed now on new housing

Population growth has long been an important issue for NSW, and in particular Sydney, with industry and all levels of government weighing in on the debate about how best to respond to the increasing demand on housing, infrastructure and services.

As at 30 June 2011, the state’s total population was 7,303,700 and is predicted to increase by more than 82,000, by the end of this financial year.

Population growth is the principal driver of demand for housing and without a new supply of housing to respond to that demand, prices for property will continue to increase beyond the reach of most.

Right now and for some time, the rate of construction of dwellings in NSW has simply not kept pace with the increasing population. This threatens to impact on housing affordability and as a consequence leave many without suitable housing options in the long term.

The importance of affordable housing cannot be understated as it affects all aspects of our economy and society. It is a problem we all own.

If dwelling development and construction in NSW continues at the current rate there will be a shortfall of more than 200,000 dwellings by 2020.

These projections must be addressed now though the introduction of government policy and strategy to meet the existing challenges and predicted demands of the future.

REINSW is lobbying for legislative reforms through our Real Space policy, which aims to create a more workable, less bureaucratic planning regime through the overhaul of the Planning Act, removal of barriers to good development, and driving positive outcomes for both developers and the community. You can download a copy of the Real Space policy at www.reinsw.com.au/realpolicies

It’s never been more important for the NSW Government to become involved in stimulating housing construction. We must examine and rectify the various matters that are impeding housing construction – and development, and a convoluted and expensive planning system are stand out opportunities for action.

Urgent stamp duty and planning reform needed to reinvigorate NSW property sector

Two months out from the next State Budget, REINSW is calling on the O’Farrell Government to urgently reform stamp duty and the State’s planning system in order to stimulate the property sector.                                                 

Real innovation needs to be brought to bear on two areas of government regulation that are restricting both the supply of housing as well as its affordability. 

REINSW is calling on the NSW Government to consider the introduction of a ‘Pay As You Go’ scheme for stamp duty to reduce the cost burden, especially on first homebuyers, by allowing a staged payment plan over three years. Further, REINSW believes that the overall rate of stamp duty should be cut as a means of increasing State Government revenues by boosting property transactions. 

The problems of housing supply and affordability are fast becoming entrenched in NSW and are key issues that need to be tackled head on in the upcoming State Budget. 

Convoluted planning controls are delaying the delivery of new housing stock that is urgently needed to meet the growing demand of thousands of people flocking to live in Sydney. As a result, housing affordability is being squeezed with many simply unable to afford their own home.

Add the significant additional burden of stamp duty to the already high price of real estate in Sydney and you have a market that is pushing the Australian dream beyond the reach of many. 

It is only through innovation that we are going to make inroads into these problems. 

There is a real opportunity now to deliver innovative solutions that will not only increase government revenues, but will bring the Great Australian Dream back into the reach of many thousands of young first homebuyers in NSW. 

To that end, REINSW stands ready to assist the NSW Government in developing further a range of initiatives that we believe could make a real difference to housing supply and affordability without threatening government revenues from taxation.

Rental vacancy rates lose ground

The rental markets in Sydney and Newcastle have failed to capitalise on January’s strong gains, both recording a decline in available properties last month. 

After the strong showing at the start of the year, it is disappointing that we have gone backwards in Sydney and Newcastle in February. It is unfortunate that the contraction of the rental market in both those cities last month will only make it harder for many prospective tenants to find a home. 

The resolution of this chronic shortage in rental accommodation won’t be achieved in the short term, however REINSW is ready to work with the State Government on this matter. 

The overall rental vacancy rate for Sydney fell 0.1% to 1.8%, driven by falls in the inner and middle suburbs of the city. The inner suburbs (0-10km from the CBD) fell 0.2 to 1.5%, while the middle suburbs (10-25km from the CBD) recorded a decline of 0.1 to 2.0%. Sydney’s outer suburbs (more than 25km from the CBD) were the only part of the city where vacancy rates increased, up 0.1 to 1.9%. 

Available rental properties in Newcastle fell to their lowest level since September last year, down 0.2 to 1.3%, while vacancy rates across the entire Hunter region dropped 0.1 to 1.4%. 

February 2012 data shows that Wollongong was the only major metropolitan centre in the state to record continued growth in rental vacancies. Wollongong reversed the trend in February with the city’s rental vacancy rate rising 0.1 to 2.4% and the entire Illawarra area recorded an increase of 0.4 to 2.5%. 

Rental vacancies on the Central Coast also increased in February by 0.2 to 1.6%, reversing all of January’s losses.

Flood crisis demands rethink of water infrastructure

An urgent rethink of water infrastructure needs and planning is required, as the cost of NSW’s flood crisis continues to be counted. 

The same communities that will be devastated by cuts to water allocations are now suffering in times of flood because of the same fundamental problem – an absence of necessary water infrastructure.

As we see floodwaters sweeping towns across NSW, it is hard to ignore the fact that much needed and valuable water is being lost because of a lack of infrastructure. Further, the uncontrolled flows of flood are devastating communities, many of which are the same places set to suffer under long-term cuts to water allocations when the flooding eventually eases. 

It is clear that the water debate needs to extend to look at the adequacy of the existing water storage infrastructure and what needs to be built to take advantage of high rainfall events such as this. 

Government shouldn’t be forgetting the fact that we have a lack of water in Australia simply because we have images of flooding on TV screens and in newspapers. It is only now that we can see just how much valuable water is lost because of a lack of storage infrastructure. 

We should be having exactly the same debate about water allocation not just in times of drought but also in times of flood. And that debate needs to focus not just on conserving water resources by cutting allocations, but also what infrastructure is needed to better capture water in times of flood. 

Unfortunately to date, the debate on water allocations has been about what can be taken away from regional communities, not what can be given to them to support them in both times of drought and flood. 

It is incumbent upon the Federal Government to look at what additional water storage and other infrastructure facilities are needed to support regional communities before they return to the same mantra of cutting water allocations to our primary producers.

Strata reform to recognise lifestyle changes

Strata living is growing in popularity and with this trend expected to continue REINSW believes now is an appropriate time to revisit the existing legislative framework.     

We applaud the NSW Government’s decision to review and where possible simplify the existing strata laws and the healthy discussions that the Global Access Partners’ Open Forum consultation will provide.

We believe it is important to simplify the strata laws to make them easier to understand, while at the same time recognise our existing and future requirements.

We are a society that is increasingly trading the traditional quarter-acre block for high quality, higher density living. This cultural shift in our accommodation preferences needs to be supported by a contemporary legislative framework. Accordingly it is appropriate that the existing strata laws be reviewed and tested to determine if they satisfy community expectations and requirements.

We have to investigate the creation of a system where development can proceed when the overwhelming majority of lot owners identify the economic/commercial advantages of renovation or development, but at the same time protect and respect the individual rights of property owners.

It must be a fundamental objective to protect the rights of the owner, the purchaser and the asset. It is also important to recognise that all buildings deteriorate with time and use, and will therefore require maintenance; accordingly provision must be made for this maintenance.

We support an investigation to develop a system that responds to our modern society and culture. We support the implementation of strata laws that simplify the ability to budget for major works, or to help make the appropriate decisions for the termination of strata schemes, when appropriate.

The growth of strata living will inevitably create an increase in strata related disputes that will need to be resolved in a cost effective and expeditious manner.

The Real Estate Institute of New South Wales believes there should be some consideration given to a specialist tribunal. We also believe education is a critical element in ensuring that all parties understand their rights and obligations.

It is also important to recognise the opportunities technology can provide, by way of example allowing people to attend meetings without being physically present.

We encourage stakeholders to contribute to the online consultation and look forward to the outcomes and reforms which will follow. We congratulate the Minister for Fair Trading on this initiative and will review with interest the development of the legislation. 

The Minister for Fair Trading Anthony Roberts has announced a three month online consultation on strata and community scheme issues to be hosted by public policy think tank Global Access Partners (GAP). The online consultation period will run from 15 December 2011 to 29 February 2012. Comments can be made directly online on the GAP Open Forum website at www.openforum.com.au  

Rental vacancies end the year higher in Sydney, lower in Newcastle and Wollongong

The latest rental vacancy data has been released by REINSW and shows a slight improvement in conditions in Sydney, but a deterioration in other metropolitan centres.

The December rental vacancy rate for the Sydney metropolitan area rose by 0.2 per cent to 1.6 per cent, the first increase in more than 3 months. While this increase is welcomed, history shows that it is seasonal.

All areas of Sydney recorded increases in the percentage of rental properties available:

• Inner suburbs (0-10 km from the CBD) rose 0.3 to 1.5%
• Middle suburbs (10-25 km from the CBD) rose 0.3 to 2.0%
• Outer suburbs (more than 25 km from the CBD) rose 0.1 to 1.4%

The picture outside Sydney remains grim with Newcastle recording a significant decline in available properties for the second consecutive month.

In December the rental vacancy rate for Newcastle fell by 0.5 per cent to 1.1 per cent, further compounding the 0.3 per cent fall recorded in November.

The overall rental vacancy rate across the Hunter fell by 0.3 per cent to 1.1 per cent.

In Wollongong the vacancy rate fell by 0.1 per cent to 2.2 percent, while across the entire Illawarra region the percentage of available properties declined 0.2 per cent to 1.6 per cent.

Vacancy rates on the Central Coast rose slightly, up 0.1 per cent to 1.6 per cent.

REINSW President Christian Payne warned the rental situation will only become tighter as we head into 2012.

“The New Year traditionally signals an increase in demand for rental properties across the board.

“The already low levels of available rental properties are likely to be squeezed even further as people return to work and schools and universities resume for the academic year.

“Unfortunately for those seeking rental accommodation, the situation will only become more difficult in the first quarter of 2012”, he said. 

Rental vacancies in Sydney unchanged for 3rd consecutive month

The latest rental vacancy data has been released by REINSW and it shows Sydney’s rental vacancy rate remains unchanged for the third consecutive month. 

November’s rental vacancy rate for the Sydney metropolitan area remained stagnant at 1.4%. 

Decreases were recorded in Sydney’s inner and outer suburbs, while middle suburbs recorded a slight increase: 

• Inner suburbs (0-10km from CBD) fell 0.1 to 1.2%
• Middle suburbs (10-25km from CBD) rose 0.1 to 1.7%
• Outer suburbs (more than 25km from CBD) fell 0.1 to 1.3%

Newcastle recorded a sharp decline last month, down 0.3% to 1.6%. In contrast, Wollongong recorded a 0.4% increase to 2.2%.

Across the Hunter region vacancy rates fell 0.3 to 1.4% and in the Illawarra region they rose 0.1 to 1.8%.

Vacancy rates fell on the Central Coast for the fourth consecutive month, down 0.2 to 1.5%.

It’s time for all levels of government to work together to address the chronic shortage of rental accommodation. 

As 2011 comes to a close, we are in exactly the same desperate straits as last year. 

In the last 12 months, the percentage of available properties for rental has not even come close to acceptable levels. This is an appalling outcome given our claim to being ‘the premier state’. 

It is incumbent upon government to act in a constructive and decisive way to tackle the rental crisis that is an entrenched part of NSW. 

REINSW is ready, willing and able to assist the Premier and his team to solve this long-term problem. 

You do have to ask the question: where exactly are people expected to live if we see vacancy rates fall even lower than they are today? 

The fact is that NSW is losing valuable skills, talent and workers to other states and territories simply because we can’t accommodate those who want to live here – or worse, because they can’t afford to. 

Assisting the government with this problem is a priority for REINSW.

October rental vacancies show marginal improvement

The latest rental vacancy data has been released by REINSW, showing only marginal improvement in Sydney’s rental market. 

October’s rental vacancy rate remained unchanged at 1.4% for the second consecutive month.

Vacancy rates rose only slightly in Sydney’s middle suburbs (10-25km from the CBD), up 0.2 to 1.6%, and in the outer suburbs (more than 25 km from the CBD) was up 0.1 to 1.4% 

Vacancy rates fell 0.2% to 1.3% in inner suburbs (0-10km from the CBD).

The picture is slightly better in metropolitan centres outside Sydney, with vacancy rates up 0.6% to 1.9% in Newcastle and up 0.2% to 1.8% in Wollongong.

Vacancy rates fell on the Central Coast, down 0.2 to 1.7 percent.

Despite increases in some areas, the overall rental vacancy outlook in NSW remains depressed. The rental crisis that has dramatically reduced housing availability across NSW, requires immediate and sustained action by both the state and federal governments to stimulate investment in the residential property market.

There will be no relief for tenants until we see interventionist action to encourage private investment, as well as slashing that planning red tape which is slowing new residential development.

To create a stable and healthy rental vacancy rate that meets both the needs of tenants as well as landlords, we need to see significant numbers of new rental properties being brought online.

Until then, we will see growing numbers of people competing against each other for an ever smaller number of available properties.

First homebuyers need a helping hand

REINSW opposed the NSW Government’s decision to remove the first homebuyers’ stamp duty exemption for existing homes, unveiled as part of the State Budget announcement. But an opportunity now exists to provide first homebuyers with much-needed financial assistance by other means. 

With the stamp duty exemption for first homebuyers purchasing existing dwellings scheduled to be abolished on 1 January 2012, REINSW is lobbying the NSW Government to assist those entering the market. The vast majority of first homebuyers purchase existing homes, therefore there must be some financial assistance available to specifically help this section of purchasers gain access to the property market.

REINSW is lobbying the NSW Government to consider ways to allow first homebuyers to pay stamp duty by installments over a five year period. 

This will ensure that the Government's revenue is secure and will also have the effect of easing the financial ‘pain' for first homebuyers. 

Having to fund the stamp duty amount as part of the purchase is a huge ask for first homebuyers, considering that stamp duty payable on a $600,000 home is $22,490 and the median house price in Sydney already exceeds that. The stamp duty on a $446,000 unit which is the median price for Sydney, is $15,560. 

The ability to pay stamp duty by installments over a five year period will assist first homebuyers to acquire their homes and will not risk the Government revenue as the stamp duty debt will be attached to the land in the same way as unpaid council rates and land tax are.

If the property is sold before the debt is repaid, the balance would be paid from the proceeds of the sale, as part of the settlement process, and repaying the state's debt would have priority over all other debts.