The number of property transactions in NSW is falling as the pandemic plays out and, as a result, many associated industries and the businesses that work within them have seen their forward workload diminish, writes Leanne Pilkington.
Government stimulus packages are important and the Morrison government has stepped up to the plate in many respects. But governments at all levels should be looking to the different levers available to them in the current climate.
At the state level, stamp duty is an obvious one. The Real Estate Institute of NSW this week called for the state government to drastically cut the stamp duty rate in order to not only help the real estate industry through the COVID-19 crisis, but the many other businesses and industries that rely on a strong housing market as well.
A property purchase “sets in motion a ripple effect of other immediate business opportunities”, REINSW CEO Tim McKibbin said, but these opportunities are being constrained by the sheer weight of the stamp duty burden.
Either buyers can’t afford to improve or personalise their property the way they would otherwise want to because they’ve had to pay so much in dead tax, or worse, the amount of stamp duty payable on NSW property is simply too much for people to buy to begin with.
An environment of fewer property transactions has broad flow-on impacts. The numbers suggest this is happening.
Auction clearance rates are a key indicator and the turnaround in recent weeks has been especially dramatic. Clearance rates have halved in a matter of weeks, volumes are lower and many properties are being withdrawn.
Listings are down, too. In the four weeks leading up to Easter Sunday, the number of new residential listings advertised for sale across Australia was 24,051, according to CoreLogic, by far the lowest level in years.
The falling number of valuations ordered for refinancing, purchasing, building and mortgagee in possession purposes is another indicator that activity is grinding to a halt.
CoreLogic data shows that in the week ended 12 April, the total number of valuations ordered was down by 24 per cent over the week, and 19.2 per cent over the last year, having been trending lower since the pandemic fully hit.
Real estate transactions play a critical role in the broader economy and it’s clear that the number of transactions has stalled.
The 75 per cent cut in stamp duty that the REINSW has called for, or even its complete removal, is not the sole fix to the problem. For businesses to navigate the COVID-19 crisis, a co-ordinated series of measures is required, with the government providing the strategic, steadying hand.
But stamp duty is one lever available for the government to pull which would have a real impact as part of a co-ordinated strategy.
It would immediately put a property purchase back on the agenda for many people, opening up a new economic stream for the many housing-related businesses to compete in.
Leanne Pilkington is the REINSW president and Laing+Simmons managing director.