Berejiklian announces housing affordability reforms
NSW government will scrap stamp duty for first home buyers on both existing and new homes up to $650,000 from July 1, despite former Reserve Bank governor Glenn Stevens advising against taking demand side measures.
On Thursday, Premier Gladys Berejiklian said starting July 1, the government will scrap stamp duty on first home buyers on existing and new homes up to $650,000. There will also be stamp duty discounts for homes up to $800,000.
These changes are expected to provide savings of up to $24,740 for first home buyers.
Currently, first home buyers are only exempt from stamp duty on new homes up to $550,000. They can also get stamp duty discount for new homes up to $650,000.
The government will also abolish the stamp duty charged on lenders' mortgage insurance, which will save around $2900 on an $800,000 property.
The government says first home buyers will save up to $34,360 under its package.
In his report to Premier, former central bank governor Glenn Stevens said he has not been a "big fan" of demand side support for first home buyers, but the government could avoid putting upward pressure on house prices if the support for first home buyers increased in line with the rise in house prices.
"The real value of the support has declined as dwelling prices have risen, which suggests that thresholds could be reconsidered. Done carefully, the extent of help could perhaps be moved up, carefully, to recognise the price rises that have already occurred, without this measure itself materially contributing to further upward pressure on prices," he said.
"The more that additional generosity to some is combined with a tightening up in some other area - such as removing the grant given to anyone buying a new home - such that the changes are more or less budget neutral, the more easily it can be defended against the criticism that it is self-defeating by inflating prices."
Mr Stevens said the government should spend the money on supply side measures instead if it wanted to solve the housing affordability problem in the long run.
"But I also note once again, for the record, that the government might expect to achieve much more for affordability in the longer run by spending this money in other ways, that would lead to lower cost supply of new housing."
Ms Berejiklian said Mr Stevens indicated the government's measures will not inflate house prices.
"His conclusion to me was nothing that you are doing will have an unintended consequences as far as he could see," she said.
Foreign buyers hit
The government will double the stamp duty surcharge on foreign investors from 4 per cent to 8 per cent, and land tax from 0.75 per cent to 2 per cent. It will also remove stamp duty discounts for investors purchasing off the plan.
However, Mr Stevens in his report to Premier advised her against taxing foreign home buyers.
"One area for caution might be demand side measures like taxing foreigners; if foreign purchasers are slowing down anyway, we may not want to push them down further," he said.
The government said it will also provide $369 million over the next three years to deliver local infrastructure, such as roads, community centres and public open space.
When asked about negative gearing, Ms Berejiklian said it had limited impact on housing affordability.
"I don't feel any of those things touch the sides. I think what touches the sides is supply, supply, supply. Let's be honest about that." she said.
Supply side measures
As part of its housing affordability package the NSW government said it will commit $3 billion in infrastructure funding from the government, councils and developers to accelerate delivery of housing.
This will include up to $500 million in additional borrowing by councils by halving the cost of borrowing for eligible projects, via interest rate subsidies.
The amount includes $369 million over the next three years to build local infrastructure such as roads, community centres and public open space.
In March, Victoria axed stamp duty for first home buyers on properties below $600,000 and introduced a stamp duty discount for those buying a home between $600,000 and $750,000.
However, the measure has been criticised by economist Saul Eslake and federal Treasurer Scott Morrison as a potential driver of house price in Victoria, unless coupled with other policies to increase supply.
