Mr McKibbin believes that part of the reason governments at all levels have been so slow to act is because of the sheer magnitude of the problem.
“Some of the required measures, such as addressing the planning system, are politically unpopular – and this has stymied positive action to address housing affordability.
“It’s time to end the politics and take the steps that are needed to secure the housing market and address the ever-worsening housing affordability crisis.”
NSW Government’s response
In her maiden press conference in January 2017, Premier Gladys Berejiklian identified housing affordability as “the biggest issue people have across the state”.
“I want to make sure that every average, hard-working person in this state can aspire to own their own home,” she said. “That's something I valued and worked hard to do and I want to make sure everyone else has that opportunity as well.”
Fast-forward six months and the Premier, Treasurer Dominic Perrottet and Minister for Planning and Housing Anthony Roberts released the housing affordability package ahead of the 2017 NSW Budget.
From the 1 July 2017, the package will:
- abolish stamp duty for first homebuyers on existing and new homes up to $650,000
- provide stamp duty discounts for first homebuyers on existing and new homes up to $800,000
- abolish the stamp duty charged on lenders’ mortgage insurance
- double the foreign investor surcharge from 4 per cent to 8 percent on stamp duty, and from 0.75 per cent to 2 per cent on land tax
- remove stamp duty concessions for investors purchasing off the plan
- provide a $10,000 grant for builders of new homes up to $750,000 and purchasers of new homes up to $600,000
- no longer allow investors to defer paying stamp duty on off-the-plan purchases.
The Premier said the measures focused on supporting first homebuyers “with new and better targeted grants and concessions” and will have the effect of “turbocharging housing supply to put downward pressure on prices and delivering more infrastructure to support the faster construction of new homes.”
Dr Andrew Wilson, Chief Economist at Domain Group, described the changes to stamp duty for first homebuyers as a “real reversal” from 2011, when the government took away the stamp duty concessions for established homes.
“First homebuyer activity is at record low levels in the Sydney market,” he said. “The longer-term average for first homebuyers in the market from ABS data available since 1992, is around 30,000 per year. Last year we saw just 16,000. The horse has bolted and there’s nothing we can do to get back to the first homebuyer levels we’ve previously seen in the market.
“The policy position of the NSW Government is clearly politically driven. It’s a political response to what has been a vigorous debate surrounding the housing market.”
But according to Dr Wilson, the changes aren’t going to make much of a difference at all.
“With relatively high prices in Sydney, the barriers to entry for first homebuyers remain steep, so there’s the likelihood of a moderate increase in activity at best. But increased demand levels with fixed supply will certainly continue to result in price growth, which in the longer term will only act to constrain first homebuyer activity.
“The problem will continue into the future because we don’t have enough houses. We need to start looking carefully at the supply side.”
According to Dr Andrew Wilson, renters are the forgotten victims and we’re on the verge of a rental crisis.
“In the city, rental affordability is at crisis levels – it’s never been tougher,” he said. “Rents are increasing faster than wage growth and renters in Sydney are paying 30 per cent more than those in Melbourne and Brisbane on the same income.
“We’re seeing supply issues in the rental market. We need to stop thinking of investors as the ‘bad guys’. If we want international investors – and believe me, we do want them – we need to stop trying to work within a framework driven by short-term political expediency.”
Impact on agents
Tim McKibbin said agents are also bearing the brunt of the housing affordability crisis.
“There’s very little stock and, as a result, agents are finding it hard to source property for consumers,” he said. “People don’t want to be out of the market for very long. Consumers want to buy before they sell, and the biggest problem isn’t selling their home – it’s buying the next one. And because they can’t buy, they don’t want to sell.
“All levels of government have to work on this problem. We need to take the politics out of it and see strong leadership and good economic sense,” Mr McKibbin said.