If ever there was a state budget in which the housing and construction sector got all it could have asked for, Tuesday’s New South Wales budget was it.
For many years now, housing industry groups in the state have campaigned for measures to reduce the tax burden and undertake reforms to boost supply.
On Tuesday, the budget delivered in many ways.
The first goodie came in the form of a more than doubling of the state’s first home owners grant, from $7,000 to $15,000, though this figure will drop back to $10,000 in 2014. In light of the winding down of these grants in Queensland and Victoria, New South Wales’ move is a bold and radical step.
The continuation of stamp duty concessions for houses under $650,000, too, is a welcome move. With Housing Industry Association (HIA) claiming that taxes of various types account for 44 per cent of the cost of new homes in Sydney, housing industry groups have long complained about the sector suffering an unduly heavy burden in this area.
Furthermore, in an important step to encourage the purchase of new homes, as opposed to existing ones, non-first home buyers will be able to get a news $5,000 grant for any purchase of a brand new home.
These measures will all help stimulate demand for new houses.
Beyond the good news on those fronts, the budget package seeks to tackle the nation’s shortage of housing supply by providing money for new housing as well as extra resources to build roads, sewerage and other infrastructure for new housing sites.
Under this measure, a total of $561 million will deliver up to 76,000 new dwelling units – more than half of which will be built in Sydney’s southwest and will be aided by bringing forward the anticipated completion of the Camden Valley Way.
In addition, all of this is coming on top of a 75 basis point cut in interest rates over the past two months.
The boost is more than welcome in the struggling state. In recent months, dwelling approval numbers in New South Wales have been awful and, at 30,830, the number of housing construction starts HIA predicted in its most recent forecast – which was made prior to rate cuts – is just above last year’s lean number of 30,550 and well down from the 32,680 housing starts the state recorded in 2010.
Still, with the interest rate cuts and the latest budget incentives, both Reserve Bank governor Glen Stevens and New South Wales Treasurer Mike Baird would be very popular among residential construction firms in New South Wales at the moment.
In the coming months, watch for those weak building approval numbers to come right up.