NSW Treasurer Dominic Perrottet talks about the housing affordability package that will see stamp duty abolished for first home buyers on new and existing homes up to $650,000
Introduction – NSW Housing Affordability Package
Ross Greewood: I want to take you to New South Wales, the new housing affordability package that’s being announced by the treasurer Dominic Perrottet with the Premiere Gladys Berejiklian today. Now, as I said, house prices are falling around the country, including in Sydney as we speak. Is what the housing market right now needs a shot in the arm or not? Dominic Perrottet, the New South Wales treasurer is on the line. Many thanks for your time, Dominic.
Interview with Dominic Perrottet
Dominic Perrottet: No worries. Evening, Ross
Ross Greenwood: It is a very comprehensive package, there is no doubt. The key, the star of it though, abolishing all stamp duty for first-time buyers on existing and also new homes up to $650,000; stamp duty discounts up to $800,000. You claimed that the savings in total could be up to $34,360. What guarantees have you got that developers and home buyers just simply won’t take that under the price?
Dominic Perrottet: Well, it’s a very good question Ross. As you said at the start, it’s a very comprehensive package. We’ve always said in New South Wales and we stand by that, that the most important thing that we can do to assist first-time buyers is on the supply side, and as you would have seen today, how we put a significant body of work around that particularly with significant investment in infrastructure with $3 billion supporting infrastructural support.
The supply is very high, but we think if you look at the range, we’ve targeted the first time buyers for existing homes, as well, in such a way that we don’t believe it will have such an inflationary affect. We’ve had the former reserve bank governor look at this, as well and he’s due. He doesn’t believe there’ll be any significant unintended consequences, but we think that it’s a very generous package. Good governments cut tax, and this is a good tax cut for those first-time buyers that are trying to get into the market.
Ross Greenwood: What you’re doing, from what I can see anyway, is you’re trying to pay for this new package partly by doubling the foreign investor surcharge from 4% to 8% on stamp duty and from 0.75% to 2% on land tax. Is that sufficient to make up for the money that you will forego by actually doing away with stamp duty for those first-time buyers?
Dominic Perrottet: It certainly assists, and it goes a fair way in support. We’ve raised about $150 million over the last 10 months that we’ve recorded on the current foreign investors surcharge. We believe that our estimates, that this would provide an extra $900 million over the next four years in addition.
But one thing I think if we’ve certainly looked at, whether it’s here or in Victoria where they’ve got a foreign investor surcharge on stamp duty at 7%, that it is very much an inelastic duty when you look at it across the board. I think the amounts that we put it at and increased it by is a pretty conservative amount. I, obviously, will monitor that, but we believe that we certainly want to get some support from foreign investors and provide that support as a first-time buyer.
Ross Greenwood: The other one, and this is going to be controversial because quite clearly there have been a lot of investors come into Sydney and New South Wales. But what you’ve done is you’ve removed all stamp duty concessions for investors buying off the plan properties. I presume what that means is that they’re going to have to pay stamp duty?
Dominic Perrottet: That’s right. We’ve certainly targeted, in this space, first-time buyers and that’s something that we’ve been focused on in this package. Having said that, we’ve also looked at other taxes, such as the tax on lenders mortgage insurance. I think, in my view, that’s a pretty terrible tax particularly given it’s a tax to people trying to get into the property market, and that’s not just the first time buyers. That tax on the lenders mortgage insurance is a costs that we will be removing is across the board and that’s about 9%, which over the course of the average line, you’re probably look at between 2 to $3,000.
Ross Greenwood: Just get back to that foreign tax hike on foreign buyers. I noticed today the Urban Development Institute of Australia has warned that increasing the stamp duty and land tax surcharges on foreign buyers will cause long-term residential price increases, effectively they say, because developers rely on pre-sales to raise capital that ultimately those sales come from foreign buyers. If they don’t actually turn up, then the new buildings won’t be built and as a result, you’ll have a supply crisis like you’ve had in the past.
Dominic Perrottet: Look, I don’t think so. If you particularly look at the exemption that we’ve made for developers who might have foreign ownership, they were previously caught up in and were captured by the foreign investor surcharge. We have exempted them and removed them from this policy, so we’ve certainly want to have a foreign investment in development. We want to improve supply and construction.
If you look at New South Wales, at the moment, how our housing rates are at record high, our construction is booming. We want to continue that and particularly make sure that we have the commensurate infrastructure to support those developments and that’s why we put in [crosstalk]-
Ross Greenwood: Just while you’re there Dominic, this is a question without notice. I’ve got a couple of them on the board, but they’re not bad questions. First up is Colin in Hunter Valley. Good day, Colin. How are you doing?
Colin: Good day, as well. How are you?
Ross Greenwood: Good. You’ve got the treasurer there. What you want to ask him?
Colin: Hello, sir. I’m only 19 years of age. I’ve just bought an investment property and one of many I hope. Question for you is I, obviously, bought under an investment loan. Does that mean now, as a first-time buyer but as an investment, will it be abolished when I go and get a personal loan for my own personal house?
Ross Greenwood: What are you talking about here is the stamp duty or are you talking about — what you talking about there Colin?
Colin: The stamp duty.
Dominic Perrottet: Well, Colin what will happen is you would be a first time buyer and what we’ve done as part of this is you will qualify the first time buyer if you live in a home after 6 months. We had a long discussion around it because there was a big push to extend the time you would need to stay in the home. But we believe that there are various purpose that you might want to purchase home, stay there for six months then use it as an investment property, you would still qualify, and in those circumstance, as long as you stay there for six months. But I understand, Colin, your point because I know as somebody who’s is in my 30s and a lot of people from my generation are actually using investment properties that are put in the market, in the first place, to build up their equity.[crosstalk]-
Ross Greenwood: Thank you for that one, Colin. Got a couple more for you. Dominic, would the first time buyers stamp duty discount apply to land or only to properties with housing or structures on them?
Dominic Perrottet: No, sir. We still provide a stamp duty exemption for land up to $400,000 and a land and home package of up to $750,000. It’s a new land and home package up to $750,000, you’ll also get an additional $10,000 grant to support you in that stage.
Ross Greenwood: One last question before we let you go. Jeff is in Glen Alpine, now. Good day, Jeff. How are you?
Jeff: Good, Ross. Hello, minister. How are you?
Dominic Perrottet: Well, Jeff. How are you?
Jeff: Good, thank you. Just a question. I heard a great initiative. I heard it’s on new or existing houses. Do apartments fall under this classification? Because most of the house prices in Sydney are going to be automatically over $650,00, even in the outer suburbs but does it mean in regards to apartments/home units?
Ross Greenwood: Good question, Jeff.
Dominic Perrottet: Great question. An apartment do count. If you look at the median price of an apartment in Greater Sydney, over the last 12 months, the average price is around $700,000 and that’s how we came to an amount of $650,000 and then tapering out up to $800,000. Because obviously, and one of the focus this year is we’re not trying to assist people get their dream house for their last home, we’re looking at them getting into their first home. We look at the average across the board, I would believe the amount we’ve come up, particularly with the apartment or duplexes, that we got the figure right.
Ross Greenwood: Good stuff. Dominic Perrottet is the New South Wales treasurer. You could hear that new initiative to try and get more first time buyers into the system. The infrastructure is important. It’s interesting what will happen with foreign buyers because that is controversial. What we’ll do, a little later on the program, is try and give you a comparison across the states as to how the various systems for first-time buyers does compare and also stamp duty as well. In the meantime, Dominic Perrottet, New South Wales treasurer, we appreciate your time here on Money News.
Dominic Perrottet: Thanks, Ross. We’ll catch up again around the budget time in June 20.
Ross Greenwood: Will do.