NSW government given an ‘F’ for property

While REINSW CEO Tim McKibbin has acknowledged that the state government, led by Premier Gladys Berejiklian, does deserve much credit for its handling of COVID-19 and defending the health of the community, he expressed that the same cannot be said for its treatment of property.

“Government has ignored issues of huge importance to the property sector created by COVID-19 and failed to address matters that have plagued the industry for decades,” he said.

Calling it “extremely disappointing”, Mr McKibbin added that, “sadly, if property was a subject, the government came up short in 2020”.

Firstly, he argued that the opportunity for tax reform was not seized upon.

As he has been previously reported by REB as saying, he reiterated that while a potential move from stamp duty to a property tax will be subject to consultation, “swapping one bad tax for another is hardly reform”. 

The CEO added: “The proposed property tax cannot be called a broad-based tax when it taxes only property, and at a time when the state desperately needs tax reform, government has delivered a discussion paper.”

He’s also pointed out the employment issue currently facing a number of would-be agents.

“From an employment perspective, hundreds of jobs remain in limbo as Fair Trading’s bureaucratic inefficiencies keep people out of work, at a time when the industry needs more qualified people to service the needs of the community.”

A further criticism from Mr McKibbin has seen him chastise the rental moratorium as “devastating” for those who have “scrimped and saved to purchase an investment property for their retirement income, or who are paying off a property for their retirement nest egg”.

He argued the government’s support for tenants adversely affected by COVID-19 has actually been funded by mum and dad investors.

Highlighting property as the most important industry in NSW, he said: “It contributes more than any other to the state’s finances and employment, and is also one of life’s essentials. The various shortcomings in the government’s performance in relation to property last year amounts to a ‘fail’.”

Alongside the criticism, the REINSW has offered up some constructive feedback for the state government, stating that if the measures were to be introduced, they “would be deserving of an A+ grade”.

Here they are:

1. Implement actual reform and remove disincentives

The housing market has a massive role to play in prolonged economic recovery, the CEO stated.

But a lack of affordable homes will significantly limit this positive potential — especially when 40 per cent of the cost of new property comes from taxes and charges.

Mr McKibbin considers it “a huge disincentive for people to transact property and the prospect of stamp duty or a property tax is particularly unattractive to people who own their home”.

Staying put, even where a home is no longer suited to an individual, or a family’s needs, is viewed as a better option.

“Tax should be a consequence of a transaction, not a consideration,” he argued, citing empirical evidence to demonstrate that reducing stamp duty will increase property transactions, benefiting both government and the community.

He said that more transactions would “easily” offset any reduction in tax from a revenue perspective, while segmentation of the market and incentivisation of certain groups could also do the trick.

“For instance, incentivising an empty-nester to move from a residence that no longer meets their needs might mean a growing family could move in. It is worth noting that, on average, 25 per cent of the available space in residential property is not utilised.”

Considering the current rates of tax applied to property transactions as outdated, Mr McKibbin believes the state government’s failure to address the issue as “simply unconscionable”.

2. End the moratorium and compensate landlords

The REINSW CEO stated that “it’s simply untrue to assume all landlords are wealthy, with around 80 per cent of landlords owning a single investment property that they depend on to pay their living expenses”.

Comparing the NSW situation to that of other states, Mr McKibbin argued that, elsewhere, governments understand that a healthy rental market means supporting both tenants and landlords.

He highlighted Western Australia’s assistance for landlords affected by deferred or reduced rent arrangements and Tasmania’s landlord support fund as examples.

“The NSW Opposition successfully negotiated an amendment to the COVID-19 legislation that empowered government to assist landlords. However, government has elected to not activate this legislative power,” he commented.

“The NSW government’s strategy of supporting only one side of the rental market is having predictably imbalanced and damaging impact.”

3. Establish a Property Services Commissioner

REB has previously reported on the REINSW’s desire to establish a dedicated regulatory authority in the state. 

Mr McKibbin has argued that NSW Fair Trading is “incapable of providing adequate consumer protection” in such complex and high-value transactions, considering it as an essential reform.

“Property is an industry that demands a dedicated, experienced regulatory authority able to work constructively and co-operatively with the industry.”

4. Re-invest revenue

The CEO has also highlighted just how much the government looks to have gained from recent property transactions, commenting that “the most recent stamp duty revenue collections show that the NSW government, in the five months to 1 December 2020, pocketed $3.378 billion, which is $297 million more than for the corresponding period in 2019”.

“In other words, in the context of the COVID-19 economic fallout, the property industry is a revenue-raising juggernaut,” Mr McKibbin said.

With so much extra cash, the CEO added that “the capacity for government to support the industry that delivered the windfall is clear”.

Stating that NSW “clearly has the money”, he reiterated that landlords who are providing support for tenants should be supported by the government.

5. Clean up a clunky planning system

Acknowledging COVID-19’s impact on the design of new housing projects, “the fundamental need to increase the number of homes built remains critical in metropolitan and regional locations”.

Mr McKibbin said current tax disincentives for developers, discrepancies between state and local government priorities, and delays in approvals are all leading to unnecessary costs — as well as constraining supply.

All in all, it is “preventing the broader economic benefits of a healthy construction market from playing out”, the CEO concluded.