Thanks to the R.E.I.W.A. in depth analysis…
‘Business as usual’ budget fails to reinvigorate property market.
REIWA welcomes the WA Government’s decision not to increase property taxes, but is disappointed in the distinct lack of leadership on display in the 2018-19 State Budget, with no new initiatives included to address housing affordability or reinvigorate the property sector.
REIWA President Hayden Groves said while it was pleasing there were no increases to property taxes, this year’s budget was a mundane budget for the property market.
“The McGowan Government have missed an opportunity to introduce measures that open doors in the property market for those that need it most. We are particularly disappointed the First Home Owner Grant remains unfairly skewed towards new-build properties and that there is no transfer duty concession for seniors to enable them to ‘right size’ into more suitable accommodation,” Mr Groves said.
In a blow for the property market, Treasurer Ben Wyatt MLA confirmed the McGowan Government would be proceeding with their election promise to introduce a new residential property tax for foreign buyers. The surcharge, which comes into effect on 1 January 2019, has increased to seven per cent from the initial four per cent proposed.
Mr Groves said introducing a foreign buyer tax was shortsighted and would have far-ranging consequences for the WA property market, which was just starting to show signs of a recovery.
“This will deter much needed investment in the state, while doing nothing to make housing more affordable for West Australians, in fact rent prices could increase due to a lack of stock as investors look elsewhere,” Mr Groves said.
“This policy measure also puts construction jobs at risk, as off-the-plan developments usually rely on securing a portion of pre-sales from foreign investors before funding can be secured. While this does not affect large-scale apartment development, it contradicts the WA Government’s push for more medium density housing. Deterring foreign investment means these projects may never eventuate, costing WA jobs.
“The short-term financial gain of this surcharge is likely to be counteracted by long-term losses as investors seek an alternative place to invest.”
REIWA will continue to call for leadership and the introduction of initiatives that will make the housing market more accessible for all West Australians.
Read REIWA’s response to the WA Budget outcomes.
2018-19 WA State Budget – REIWA’s response
The 2018-19 WA State Budget was handed down on Thursday, 10 May 2018, with disappointing results for the WA property market.
Ahead of the budget, REIWA outlined a six-point plan for a fair, sustainable and prosperous property market. Here are the Institute’s response to the largely underwhelming budget outcomes:
1: REIWA strongly recommends that the State Government must not increase transfer duty rates or change thresholds
REIWA welcomes the State Government’s decision to not increase transfer duty rates or change thresholds. Transfer duty makes up 14.7 per cent of the state’s tax revenue – almost 50 per cent of the total property tax envelope – a hefty amount. With transfer duty rates now remaining steady, this will create welcome certainty for buyers.
2: REIWA strongly recommends that the State Government maintains the existing transfer duty exemption for first home buyers at $430,000, and re-introduce the $3,000 FHOG grant for the purchase of existing dwellings.
REIWA is disappointed in the State Government’s lack of action to support all first home buyers in WA. REIWA outlined clear policy measures that would help even the playing field between buyers of new and established homes at no additional cost to the government, but this was ignored.
This State Budget outcome once again reiterates the Government’s disregard for improving the opportunities for first home buyers within the WA property market.
REIWA will continue to advocate for the need to bring back some equality in the way the first home buyer grant is applied and remains ready to assist the Government in getting the Budget back to surplus.
3: REIWA recommends the State Government introduce a $10,000 concession on transfer duty for seniors over the age of 65 to encourage appropriate ‘right sizing’.
The State Government has once again rejected REIWA’s 2018-19 State Budget recommendation to make the housing market more diverse for all West Australians by declining to introduce a concession on transfer duty for seniors to allow them to right size into a house that is more suited to their needs.
REIWA consistently advocates that WA needs to have the right mix of housing options and diversity to meet the changing needs of the community. The Government has cited a lack of funding for the program, despite REIWA modelling showing transfer duty revenues would increase due to the release of higher-priced, larger homes being acquired by family groups more suited to larger homes.
4: REIWA recommends that the State Government make no further changes to rates or thresholds for land tax.
REIWA congratulates the State Government for listening to the concerns of the WA property industry by not increasing property taxes. REIWA is pleased the State Government did not consider increases to property taxes for WA residents as part of their Budget repair measures, recognising the impact of the three consecutive land tax increases in previous Budgets.
5: Revoke/defer the introduction of foreign owner duty surcharge to keep WA property competitive.
REIWA has serious concerns over the State Government’s decision to increase the four per cent transfer duty surcharge for foreign owners (to come into effect on 1 January 2019) to seven per cent. This will deter investment, while doing nothing to make housing more affordable for West Australians.
There is no evidence to suggest that having the surcharge in place mitigates unsustainable rising house prices in any way and risks significant increases in rents as available rental stock inevitably declines.
The short-term financial gain of the surcharge would be counteracted by long-term losses as investors seek an alternative place to invest.
This policy measure also puts construction jobs at risk, as off-the-plan developments usually rely on securing a portion of pre-sales from foreign investors before funding can be secured.
While this does not affect large-scale apartment development, it contradicts the WA Government’s push for more medium density housing. Deterring foreign investment means these project may never eventuate costing WA jobs.
6: REIWA recommends that the State Government undertake a state tax review. This review must assess the viability of and financial implications on the community of a shift to a broad-based land tax system that ultimately removes transfer duty.
REIWA is dismayed with the State Government’s position to continue refusing to undertake a state tax review, which would’ve enabled the Government to seriously look at ways of ensuring future revenue streams are more sustainable. Removal of transfer duty would also improve housing affordability and mobility.
Whilst REIWA understand that reform at a state level may be more difficult to achieve without reform at a federal level and the state’s fiscal position is tough, it is still disappointing the State Government has shaken off tax reform as a priority.
Other Budget outcomes:
- 50,000 new jobs over the next two years
- Two additional Magistrates funded by an increase to court and tribunal fees of 7.5 per cent in 2018-19 ( $ 11.2 million)
- 4.8 per cent increase in household costs, approximately $292 per household.
- $394 million for social and affordable housing in METROHUBS, creating 1390 new homes of which 320 will be social housing and 400 affordable housing.
- Eight METROHUBS in the pipeline
- $15.3 million for the establishment of Infrastructure WA.
Read REIWA’s official media release on the 2018-19 State Budget.