How the NSW 2024 Budget impacts investors
While the New South Wales Government says it has a responsibility to ‘back every citizen striving to own a home, rent a home, or who needs social housing’ and the 2024 Budget includes a number of measures and initiatives aimed at stimulating growth in the property market, it does have significant implications for property investors.
Here we take a look at some of the announcements:
New housing affordability – stamp duty concessions for first time buyers
The introduction of a new housing affordability package includes a number of initiatives designed to make it easier for first-time buyers to enter the property market. This includes measures such as stamp duty concessions and grants for eligible buyers, as well as incentives for developers to build more affordable housing stock.
Improved infrastructure and increased housing stock
For existing property investors, the government has announced a number of infrastructure projects that will potentially help support property values in certain areas of the state. This includes funding for new transport links, roads, and other amenities that will make certain neighbourhoods more attractive to potential buyers and tenants.
In addition, the budget includes measures to support the construction of new housing stock, which will help to alleviate some of the supply constraints that have been driving up property prices in recent years. This includes funding for new social housing projects, as well as incentives for developers to build more medium-density housing in areas that are experiencing high demand.
Land tax-free threshold raised
The Government also announced the tax-free threshold will be raised for land tax to a combined property value of $1,075,000, a rise of $106,000 on the previous year.
Land tax is paid by investors (landlords, holiday homeowners, and businesses with property holdings) on the total value of properties they own in the state, including vacant land. Homeowners’ principal places of residence and working farms are exempt from the tax.
The threshold will remain at that level from then on, meaning more property owners will be liable to pay land tax each year as their property values increase.
The Real Estate Institute of NSW (REINSW) the peak industry body for real estate agents and property professionals in NSW, says Government is already overly dependent on tax from property consumers; it points out Revenue NSW figures show that the Government has already collected nearly $1 billion in stamp duty more this financial year than last – and the June figures aren’t in yet, so there’s still a month to go.
In FY23, property consumers contributed nearly $9.9 billion to the NSW economy. This financial year, the contribution already stands at over $10.5 billion.
“To expect property owners to now carry an even greater burden, as they will through Government’s land tax reforms, is unfair and reckless,” says CEO Tim McKibbin. While owner-occupiers are unaffected, the “sneaky” tax change would lead landlords to hike rents or sell properties, exacerbating the rental crisis.
Emergency Service Levy (ESL) replacement levy on the table
The REINSW has revealed another under-handed NSW Government plan to charge property owners more to offset increasingly ‘unaffordable’ insurance costs.
Buried in the Budget’s explanatory notes is the reference to the NSW Revenue Legislation Amendment Bill 2024, which outlines the NSW Government’s plan to redirect the cost of the Emergency Service Levy (ESL) away from insurance companies to instead be incurred by property owners.
The resourcing requirements for the state’s emergency services are largely funded by the ESL. The growing impacts of climate change and more natural disasters mean these requirements are increasing, making insurance more unaffordable, according to the Bill.
“The Government will remove the ESL on insurers and instead spread a replacement levy across a broad base of property owners,” the Budget Paper reads.
Increasing surcharges for foreign purchasers, increasing the surcharge land tax and freezing the land tax threshold are among the measures proposed.
REINSW says transferring the increased insurance costs of our emergency services to property owners is shocking but unsurprising, given Government’s track record.
“This Government’s solution to the state’s economic woes is clearly and unashamedly singular: property owners must be able to afford it, so they can pay for it,” says Tim McKibbin.
“If the Bill passes, property owners and property buyers will be charged more so Government can reduce insurance costs. Government’s expectation is that insurance companies, in good faith, will adjust their premiums accordingly.
He believes more tax on property owners means reduced investment in property. “In a housing crisis, this is among the most reckless courses of action,” he says.
What should investors do?
We always recommend you consult with your financial advisor or property expert to understand how the changes may affect your individual circumstances so you can make informed decisions your investment in light of the new budget initiatives.
As members of REINSW, we are part of the voice lobbying government, and raise issues and concerns affecting property owners on your behalf.
We do more than manage property. We are ensuring your issues and concerns are heard by Government, and give you information to help you make informed decisions about your asset.
We do all the training to ensure your property is legal and your paperwork is in order, and we work hard to ensure your property is leased with reliable and good tenants. We also take the stress out of marketing, managing and running your property, ensuring you get the best from your asset, and your asset is properly cared for.
Contact us now for more information about property management and property investment. Call us on 02 4954 8833, send us an email to mail@apnewcastle.com.au or pop into our Cardiff office for a chat to see how our property management services can help.