23/10/2019 - 13:25

Industry welcomes stamp duty relief for apartments

23/10/2019 - 13:25

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Off-the-plan apartment buyers in Western Australia will receive a 75 per cent rebate on stamp duty for the next two years, capped at $50,000, under a stimulus package unveiled by the state government today that has been roundly welcomed by the development industry.

Industry welcomes stamp duty relief for apartments
The state government's stamp duty relief initiative is expected to be a major boost for its efforts to increase high density development and housing diversity. Photo: Gabriel Oliveira

Off-the-plan apartment buyers in Western Australia will receive a 75 per cent rebate on stamp duty for the next two years, capped at $50,000, under a stimulus package unveiled by the state government today that has been roundly welcomed by the development industry.

The initiative was jointly unveiled by Premier Mark McGowan, Treasurer Ben Wyatt and Planning Minister Rita Saffioti this morning, and is expected to cost the state budget around $30 million.

Mr McGowan said government had consulted closely with industry prior to coming up with the stimulus package, which was designed to create jobs, help enhance liveability across the state, and further diversify housing choice.

“This is designed to create construction jobs and is designed to bring forward developments and attract investment into WA,” he said.

“It’s limited to two years, then we will see how it is tracking, but it is designed to get development happening in WA right now.”

Mr Wyatt said no cap would be placed on the number of rebates to be issued, while it would also apply to the state government’s 7 per cent foreign buyer surcharge, which was put in place in January.

“Similarly, we haven’t put a cap on the value of apartments, so that means anyone purchasing off the plan, regardless of the price point of the apartment, will have access to the rebate, of course capped at $50,000,” he said.

Mr Wyatt said including the foreign buyers surcharge in the rebate would give WA apartment developers a value proposition compared with other states.

“We currently have the most generous system in Australia,” he said.

“Every other state has a higher foreign buyer surcharge, or they have an ongoing land tax liability for foreigners. 

“We don’t have those, so theoretically, if you are making these decisions based on the cost of entering the property sector, we are a much more attractive location to invest.

“While foreign buyers are a small proportion of total housing transactions, they can make up a large proportion to get away to finance a larger apartment complex. 

“That’s why we have made this decision today, because the rebate captures not just stamp duty, but the foreign buyer’s surcharge as well.”

Property Council of Australia WA executive director Sandra Brewer said the rebates made stamp duty imposts equitable across house-and-land packages and multi-residential developments.

“Up until now, if someone was to buy a house-and-land package, the stamp duty would only be applied to the land,” she said.

“For an $800,000 property, perhaps the land is $399,000, so the stamp duty is around $12,000. 

“For an apartment that’s worth $800,000, the stamp duty has been $32,000. 

“What this policy means today is that differential is removed, people who choose multi-unit dwelling will be able to save on stamp duty, and it levels the playing field between house and land packages, perhaps on the outskirts of Perth, to what people can buy at inner-city areas and beach or river locations.”

Master Builders Association WA executive director John Gelavis said the $28 billion property sector’s peak groups were pleased that government had responded to the extended downturn in housing activity.

Activity has steadily declined in WA since peaking at around 32,000 dwelling starts in 2015, with housing starts expected to come in around 14,000 this year.

“The new housing market has been at the bottom of the cycle, the government has listened to the peak bodies of industry and they’ve taken action,” Mr Gelavis said.

“They’ve acted and they’ve acted decisively and we can’t ask for more than that.”

He said the stamp duty rebates would also complement measures put in place to kick-start detached housing construction, including lifting income thresholds for low-deposit lending agency Keystart, and generous grants for first homebuyers building new properties.

“The government has done a significant amount to support first homebuyers and the great thing now is there is housing choice,” Mr Gelavis said.

“There is great support for first homebuyers and great support for residential builders building greenfields developments, but I think now it gives those who are building in the multi-unit space a bit more support too. I think it’s a balancing act that government needs to apply, most homebuilders would like to see a bit more done, but I think the Keystart announcement was a significant boost for first homebuyers, particularly in greenfield developments too.”

Apartment developer Paul Blackburne endorsed the decision, describing the shift as a significant change that would encourage more activity in WA property.

“The government’s reduction in stamp duty will absolutely help buyers to make that decision to purchase off the plan and downsize, upsize or invest,” Mr Blackburne told Business News.

“It is one of the most significant initiatives for WA’s economy in 20 years.

“Stamp duty is a major inhibitor to economic growth. It is a highly inefficient tax that costs jobs and makes it difficult for more people to afford an off the plan apartment.”

Urban Development Institute of Australia WA chief executive Tanya Steinbeck said the initiative was perfectly timed with the state government’s efforts of increasing infill and higher density development.

“With immediate implementation, we are expecting to see a positive reaction from the market given the generous and potentially multiple rebates on offer. This opens the door for seniors looking to right-size into a more appropriate dwelling, and will support the state government’s infill agenda,” Ms Steinbeck said. 

“With a two-year time period for the rebate, this provides a much-needed injection of activity to stimulate jobs growth in the construction sector and the flow-on impacts of that to the broader economy will be positive.”

Western Australian Apartment Advocacy also welcomed the announcement, director Samantha Reece said.

She said a survey by WAAA of 3,312 apartment owners indicated just 14 per cent were prepared to purchase again off the plan prior to the introduction of stamp duty relief. 

“With the future of Metronet hanging on the balance of apartment pre-sales, this decision by the McGowan government will ensure that people who have been dissuaded to buy an apartment will now have an added incentive,” Ms Reece said.

“This stamp duty relief will undoubtedly stimulate the apartment market and that is very promising with the government’s focus to achieve 47 per cent infill targets.”

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