Budget failing many buyers: Douglas Driscoll

GUEST OBSERVER

We need more justification around the NSW Government’s solution for housing affordability after it revealed no concessions would be afforded to buyers making property purchases over $800,000.

The measures, taken to cabinet last week, proposed stamp duty would be abolished on all homes up to $650,000 and relief to buyers of homes up to $800,000.

My offices are already experiencing vendors around both the $650,000 and $800,000 price points asking agents to list their homes for slightly more, given that first home buyers will soon have more to spend. 

When first home buyer grants were introduced a few years ago, as a group, we saw the same thing. The market needs to find its natural level, as otherwise these measures could prove counter-productive and possibly even lead to an artificial increase in prices.

The new measures certainly look like a step in the right direction, but we need to stop the applause and critique the performance. It is a complex matter, as the State Government needs to protect the cash cow that is stamp duty, but also make an attempt at solving the affordability crisis.

If the intention is to alleviate affordability woes amongst first home buyers, how did it reach the figure of $650,000? This tells me the measure was designed to drive more first home buyers into apartments.

With far fewer investors as a result of the macro-prudential measures and tens of thousands of new apartments in the pipeline, who is going to buy them otherwise?

Sydney’s median dwelling price is $872,300 – two thirds the figure proposed for abolishing stamp duty, and according to CoreLogic, 20 percent of Sydney Metro dwellings sold at a price of $650,000 or less over the past 12 months were houses.

This rises to 34.4 percent when looking at dwellings that sold for a price of $800,000 or less.

Last year, the apartment development boom raised concerns about an apartment oversupply in Sydney. The stamp duty changes are designed to drive more first home buyers into apartments. 

First home buyers currently represent about four to five percent of the market. We need to get this to double digits and this measure might not do that.

When you really look at it against the market, less than 10 percent of Sydney’s suburbs would have homes with a median price below $650,000.

If the Government was serious about alleviating barriers, it would completely abolish stamp duty for first home buyers or at the very least make the first $650,000 exempt, irrespective of the purchase price, and not cap it at a price that forces people into apartments to reverse engineer the cycle. 

In addition to believing first home buyers be exempt from paying stamp duty, they should have to reside in the property to be eligible. 

However you spin it, rentvestors are still investors, and we have been overly advocating rentvesting as a wealth strategy, which is taking its toll on the market.

The base of the affordability iceberg is that there have been too many investors in the market and unless we’re careful, these measures could inadvertently make things worse. It is further exacerbating the problem which APRA has tried so hard to alleviate. 

If the Government is not open to completely abolishing stamp duty for first home buyers on all properties, concessions should at least be tracked against median house prices annually. 

House prices are relative against the cost of living – someone in the Eastern suburbs might pay more for property compared to someone in Western Sydney, but they are usually paying more for everything – not just property. Therein lies the problem – the affordability crisis is a Sydney issue, not necessarily a State issue. 

Regional NSW first home buyers are set to benefit the most from this, but what about buyers in Sydney’s Inner West, Lower North Shore, Eastern Suburbs and the South?

If you are looking to buy in these areas and hoping to benefit from the abolishment of stamp duty for properties up to $650,000, you can either uproot your life, don’t buy at all, or buy a garage.

DOUGLAS DRISCOLL is CEO of real estate agency Starr Partners.