Kamis, 25 Juni 2009

NSW State Budget: the good, the bad and the windows of opportunity...

It’s time we had a look at the NSW state government’s recently announced budget for 2009-2010 – what’s in it for tenants?

Aside from a general increase in the maintenance budget of Housing NSW (long overdue), there are three initiatives of interest. We’ll call these the much-touted “saviour” of the housing industry, an attempted medium- to long-term plan to combat homelessness, and a new subsidy to assist victims of domestic violence to move out on their own.

We’ll look at each in turn over the next few days… Starting with the saviour:

The Housing Construction Acceleration Plan.

In the words of the NSW State Treasurer, Eric Roozendaal, “this provides a 50 per cent cut to stamp duty for newly constructed dwellings up to $600,000.00 purchased in New South Wales from 1 July to 31 December 2009”. This applies to everyone except for first home buyers, who already enjoy substantial relief from stamp duty, as well as various first home owner grants. (Notably the State Governments’ contribution to such grants is to continue for another year). So, this initiative might coax landlords as well as owner-occupiers into the market for new housing in the immediate future.

The government suggests in its “Budget Highlights” package that this is an investment to “support growth and construction jobs in the housing sector”. The Urban Taskforce Australia, an organisation representing property developers, has hailed the plan as the “strongest measure taken by any government in Australia to support new home construction”. Clearly, they’re quite happy with it, and why wouldn’t they be? As a targeted economic stimulus measure, it sounds like good news. But what’s it really going to do for the housing market?

The CEO of The Urban Taskforce, Mr Aaron Gadiel, suggests “… far more people will benefit – not just first home owners. Some people who aren’t first home buyers are now likely to bring forward their home purchase to take advantage of this grant”. The Housing Industry Association’s Executive Director, Mr Graham Wolfe, puts it this way: “the saving in stamp duty provides a window of opportunity for anyone looking to buy a new home”.

“A window of opportunity”… Get in quick before the money runs out! You can’t afford to miss it!!! At these prices you’d be a fool to put your money anywhere else…

Now, call me a nay-sayer and a ne’er-do-well, but perhaps there are some very good reasons why people should NOT bring their purchases forward, simply to take advantage of yet another “saving” on stamp duty. Enticing home purchasers to prematurely increase debt in order to qualify for a stamp duty concession does not strike me as a good idea. To illustrate this point, I recommend a cursory glance over numerous comments made earlier on the Brown Couch. Start with the "numbers" tag and work your way back from there.

Correct me if I’m wrong, but isn’t this Global Financial Crisis largely the product of housing related debt? Does it not seem a little odd to try to reinvigorate the market by offering yet another incentive to borrow more money now? Can somebody in government please give me a definition of the word irony?

Still, I do see one positive that may come out of all this. It could give us a few more opportunities to test out the new “Mortgagee Repossessions” amendments to the Residential Tenancies Act, now that they’ve made their way through the legislature.