Timothy Hibbert, head of building and property forecasting at BIS Oxford Economics (BOE), believes the latest property tax reforms from the state “represent stimulus more than reform”.
After passing through State Parliament last week, Thursday, 10 November, the “historic” tax heralded for its capacity to assist 80 per cent of home buyers in NSW has been labelled soft due to “the beneficiaries of this policy shift [representing] a small share of the total market”.
“The incentive will be significant enough to pull out additional demand that will soften the decline in Sydney property prices in coming months,” Mr Hibbert said, joining regional stakeholders and Real Estate Institute of NSW (REINSW) chief executive officer Tim McKibbin in criticising the government’s move.
Mr McKibbin believes that “until real measures are introduced to address the undersupply of housing, prices will remain out of reach for many aspiring first home buyers”. He added: “Excessive taxation not only inhibits purchasers, [it also] inhibits supply.”
Mark Sleiman, the licensee in charge of PRD Tamworth, outlined that only a minute portion of his buyers would utilise the scheme.
Mr Hibbert explained: “The impact of the policy will be focused on properties north of $700,00 and below the state price cap of $1.5 million.
“Annual property tax payments will be based on the land value of the property. Initial tax rates for owner-occupier purchases are set at $400 plus 0.3 per cent of the assessed land value per annum (higher for investment purchases).”
He relayed how Revenue NSW stamp duty exemption data postulates that 10 per cent of first home buyers, majority located in Sydney, purchase properties over $800,000.
“Buyers who tempered their purchase price limit to avoid stamp duty may now opt to buy at a higher price point, so this percentage is set to jump. In addition to lowering the deposit hurdle, the ongoing tax will add to purchasing power for first home buyers looking to buy at the higher end,” he said.
It’s anticipated the initiative will lift first home buyer demand in a similar vein to previous schemes, including the First Home Owners Grant and the HomeBuilder scheme, which spurred major spikes in first home buying demand.
He acknowledged the legislation does “set a scaffold for more contentious steps in overhauling property taxation”.
Mr McKibbin concluded that “further legislation in this space is to be expected”, though he did note that “New South Wales is scheduled to have an election in March 2023, with the Labor Opposition having stated an intention to scrap the policy”.