What The Government Is Really Doing To Help You Buy A Home
We break down exactly what the Government does and wants to do to make housing affordable and how it will help home buyers.
We went through the NSW government's Housing Affordability Strategy with the Housing Industry Association's Principal Economist, Tim Reardon to decipher it all.
Increase Housing Supply
This helps enormously according to Reardon, "Housing affordability is all about supply and demand. Demand has increased over the past 20 years as the population grows. What there's not been is an increase in supply."
The imbalance caused Sydney property prices to rise rapidly, but now the market is cooling.
"For the first time in at least 20 years we're seeing supply and demand for housing in equilibrium."
Faster housing approvals
Reardon says this is an important issue and blames "onerous and cumbersome approval processes" for the slow progress in the past. The government aims to have 90 per cent of housing approvals determined within 40 days of application by this year.
The homes need somewhere to be built, so yes, this helps.
Stamp duty indexation
The NSW government announced this yesterday. It's basically pegging the seven stamp duty brackets to CPI, so that most buyers don't end up in the top three tiers like they are now. It'll save buyers around $500 for now. Had it been implemented from the beginning, they'd be saving around $7000. The HIA welcomes it, "it's an important long term step" says Reardon.
Stamp duty concessions for first home buyers
First home buyers don't pay any stamp duty on properties less than $650,000. They get a discounted stamp duty on properties up to $800,000. "The state government provides a significant disincentive by imposing a high rate of stamp duty... So it's certainly appropriate that the government provides assistance" says Reardon.
He also notes that 44 per cent of the cost of a house and land package is taxes and charges.
First home owners grant (new homes)
Whether you're buying or building a new home, first timers will get $10,000 towards it. That has benefits for society as a whole, says Reardon "assisting first home buyers is a very important goal for governments. People who own their own home are more likely to be gainfully employed, and less likely to be incarcerated."
Abolishing duty on lenders' mortgage insurance
Insurance duty on lenders' mortgage insurance is imposed at a rate of nine percent of the premium. It could save buyers thousands, and Reardon believes, help many into the market.
"It's opening that initial deposit that is the biggest barrier."
Higher stamp duty for foreign investors
This is the state government's first bad idea, according to the HIA.
"What we've seen... is around four or five billion dollars exit the housing market due to a range of imposts from state and federal government."
The other problem he notes is, "if you force investors out of the market in the short term you may see prices ease, but long term you reduce the supply of new housing and as a consequence a shortage in renting arises."