The New South Wales budget revealed last night was a very predictable affair. We will be going into deficit in an attempt to ease the recession and most of the initiatives had been leaked well before " budget night ".
Rumours that stamp duty would be abolished on new homes to try and jump start building activity proved to be partly right. Stamp duty will be halved on new homes worth up to $ 600,000 - for a period of six months !
This will reduce the cost of a new home worth $ 600,000 by $ 11,245 and - hopefully - induce investors to spend and thus reduce the dire shortage of rental accommodation.
There have been warnings of expected increases in housing prices - and rapid increases in rents from industry sources, but any temporary relief to create extra building activity can be a two edged sword !
If we bring forward housing starts to the balance of this year we are robbing next years commencements and creating a lack of work in the building trade when that period arrives.
There would seem no alternative than a new announcement later this year, extending the stamp duty holiday to try and cover that shortfall.
It's a bit like that new home buyer grant. The Federal government has a tiger by the tail. Even the hint of the grants being discontinued brings a surge in take ups - with the prospect of a big, deep black hole if it happens.
It seems that we can expect the tandem benefit of first home buyer grants and a drop in new home stamp duty to continue indefinitely because the consequences of their withdrawal would be too horrible to contemplate.
It's a predictable outcome of efforts to insulate the home economy from the ravages of a world recession - and as that old saying goes - " It goes with the territory ! "
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