07.20.2022 Buying Tips

What The NSW Budget Means For Our Local Property Market

What The NSW Budget Means For Our Local Property Market

The recent NSW budget includes a raft of measures designed to make housing more affordable and accessible.

We take a look at how it will impact the eastern suburbs property market.

The latest NSW budget takes the first step in stamp duty reform, along with several other initiatives, in an attempt to improve housing affordability and accessibility. How will it affect the eastern suburbs property market?

Will the NSW budget solve housing affordability?

In the wake of the recent property market boom, housing affordability has been a hot-button topic across Australia. Sydney property, for example, rose in price by 27.7% between September 2020 and May 2022, according to CoreLogic, so it’s easy to understand why the state government is attempting to address affordability, particularly for first-home buyers trying to get their foot on the property ladder and essential workers like teachers, nurses and police.

As well as improving affordability, the government plans to ramp up housing supply across the state by fast-tracking planning assessments and rezoning parts of Sydney to encourage residential development.

Stamp duty reform for first home buyers

The NSW government announced plans to improve housing affordability in the 2022-23 budget, handed down at the end of June. One of the budget’s key policies is First Home Buyer Choice, a scheme designed to reduce the upfront cost and burden of stamp duty on first home buyers. The initiative gives first home buyers purchasing a property worth up to $1.5 million the choice between paying a property tax or stamp duty. To be paid annually, the property tax amounts to 0.3% of the property’s land value plus $400.

With the government quoting that home ownership has fallen from around 70 per cent in the 90s to approximately 64 per cent today, particularly among younger and lower income groups, First Home Buyer Choice may help remove one of the barriers for would-be homebuyers. The government says that eliminating stamp duty could cut up to two years off the time first home buyers need to save for a home.

Help for older singles, single parents and essential workers

The government has also announced a trial shared equity scheme to assist single people over 50, single parents and police, nurses and teachers who are first home buyers to purchase a home. The program will see the state government contributing up to 40 per cent of a property’s purchase price in exchange for an equivalent ownership share in the home. Properties in the eastern suburbs must be priced at $950,000 or less to qualify for the scheme, and participants must meet the income cap of $90,000 a year (or $120,000 for couples).

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Like the federal government’s similar Help to Buy program, the scheme has the potential to make homeownership more achievable for low to middle-income earners in areas that previously would have been out of reach, like the eastern suburbs. Together the schemes may help essential workers to buy homes closer to their workplaces and foster greater economic diversity in neighbourhoods like ours.

While the First Home Buyers Choice and shared equity schemes may mean the difference between purchasing a home or not for individual homebuyers, experts agree that they’re unlikely to profoundly impact the broader property market. The proportion of buyers they stand to assist is limited, which means they are extremely unlikely to reduce property values.

Tax changes for property investors

Property industry groups such as the Property Council NSW and the Urban Development Institute of Australia NSW have expressed dismay at the government’s plans to double the 2 per cent land tax surcharge for foreign property investors to 4 per cent. Just as disappointingly, local property investors may also find themselves paying more tax, with the 1.5 per cent early land tax payment discount set to be reduced to 0.5 per cent from January 2023.

What else is impacting the eastern suburbs property market right now?

Of course, all eyes in the property market are on interest rates. In May, the RBA lifted interest rates for the first time since 2010 and then raised them again in June and July. The cash rate, which was 0.1 per cent in April, is now sitting at 1.35 per cent. Growing inflation, the war in Ukraine, rising oil prices and an increased cost of living are also adding to the general market uncertainty.

The outcome is that home buyers’ ability to borrow money is slightly reduced, and consumer confidence has taken a hit. Add to this an increase in the number of properties on the market compared to the same time last year, and you can see why the media is reporting nothing but doom and gloom for the property market. But the reality is that there is much more nuance in the market than initially meets the eye. While auction clearance rates are lower than this time last year, for example, we’re now seeing many properties sell – and sell well – post-auction. We’re also seeing investors returning to the eastern suburbs market. And despite a slight softening of property values this year, the vast majority of eastern suburbs vendors continue to reap the price gains of the last two years and are coming out well ahead when they sell. In fact, more than 95 per cent of Sydney property sales in the March quarter turned a profit.

If you’re looking for more advice about selling or buying in the eastern suburbs, our team is happy to help. Get in touch today.