What about the rest of us?

Go figure! The state government has reaped the rewards of the burgeoning real estate market.

But what about the rest of us?

The NSW government announced its annual budget this week and it’s no surprise that the real estate market featured strongly. Their financial position is stronger than expected as they rode the wave of soaring house prices and posted more than $9 billion in stamp duty revenue – over a third of the state’s tax revenue.

Major contributors to the upsurge in house prices are the record low interest rate and government assistance packages, which the budget found offset the impact of weaker population growth due to the coronavirus pandemic.

However, predictions are that price growth is set to slow towards the end of 2021. With more sellers encouraged by the tempting prices to list their properties for sale, and buyers being discouraged as they are priced out of the market, dwelling prices are expected to peak and the market will shift towards being more in favor of buyers than it is now.

It has been evident during this boom that the upswing has been primarily driven by owner-occupiers. The RBA has stated that interest rates are set to remain stable for the next few years so unless investors start to re-enter the property market then lending standards are unlikely to get more restrictive.

Despite stamp duty being a major contributor to the NSW Government’s coffers, it is still working towards an annual land tax system rather than a one-off sum paid at the time of purchase. They believe this will increase housing affordability and provide it with a more reliable revenue stream.

According to the government progress report, the changes are expected to increase home ownership by about 6% and reduce house prices in the order of 3-4% but a timeline for implementation has not been announced.

A by-product of this current property boom, and the increased volume of people working from home, has meant that homeowners have explored renovating their own home rather than selling and purchasing another one. This, along with the federal government’s HomeBuilder policy, has meant that the construction industry has experienced its own sudden growth.

The budget spoke about what lay ahead for the building industry and housing supply.

Building approvals issued by local councils rose sharply towards the end of 2020 and the beginning of 2021. With the extension of the HomeBuilder commencement deadline to 18 months, the government believes that the pipeline of work would push more residential construction into 2022. With projected population growth retracted due to COVID-19, a potential oversupply of dwellings could result.

In addition to this, it is thought that once international travel resumes when borders most likely reopen next year, the demand for renovation will drop off as the population chooses to spend their hard-earned dollars on well-deserved entertainment and leisure.

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Published August 24, 2021

By Belinda Cassano