REINSW marks NSW’s property effort a ‘fail’ and calls for 5 key changes

While highlighting the government’s “failure” to address issues of “huge importance” to the property sector created by COVID-19, REINSW CEO Tim McKibbin noted that the government also failed to address matters that have plagued the industry for decades.

“The opportunity for tax reform was not seized upon. The potential move from stamp duty to a property tax is subject to consultation, but either way, swapping one bad tax for another is hardly reform,” Mr McKibbin said.

Mr McKibbin also hit out at the rental moratorium, calling it “devastating”.

“For people who have scrimped and saved to purchase an investment property for their retirement income, or who are paying off a property for their retirement nest egg, the impacts of the rental moratorium have been devastating. The government’s support for tenants adversely affected by COVID-19 has actually been funded by mum and dad investors.

“Property is without question the most important industry in NSW. It contributes more than any other to the state’s finances and employment, and is also one of life’s essentials. The various shortcomings in the government’s performance in relation to property last year amounts to a ‘fail’,” Mr McKibbin said.

Calling on the government to do better this year, REINSW said that “all is not lost”. As such, it outlined a list of measures it believes the NSW government “could and should" take in 2021 that would be deserving of an A+ grade”.

1. Implement ‘actual’ tax reform 

“The housing market has a huge role to play in the prolonged economic recovery; however, the lack of affordable homes for people to buy and rent will significantly limit the positive potential of real estate to contribute,” Mr McKibbin said.

He opined that taxes and charges are a “huge disincentive” for people to transact property.

“The prospect of stamp duty or a property tax is particularly unattractive to people who own their home. Staying put, even if that home is no longer suited to their needs, is viewed as a better option.

“Tax should be a consequence of a transaction, not a consideration,” Mr McKibbin said.

Segmenting the market, he opined, is another opportunity for government to increase property transactions and help the economy.

“For instance, incentivising an empty-nester to move from a residence that no longer meets their needs might mean a growing family could move in. It is worth noting that on average, 25 per cent of the available space in residential property is not utilised.

“The current rates of tax applied to property transactions are over 30 years out of date. Failing to address this issue is simply unconscionable,” he said.

2. End the rental moratorium and compensate out-of-pocket landlords

“The NSW government is ignoring the fact that the rental moratorium is jeopardising the financial security of mum and dad investors who depend on their rental income to live,” Mr McKibbin said.

Noting that “other states understand that a healthy rental market means supporting both tenants and landlords”, he called on the government to do more.

“The NSW opposition successfully negotiated an amendment to the COVID-19 legislation that empowered government to assist landlords. However, government has elected to not activate this legislative power.

“The NSW government’s strategy of supporting only one side of the rental market is having a predictably imbalanced and damaging impact,” he says.

3. Establish a Property Services Commissioner

“NSW Fair Trading is a high-volume, low-dollar value, minimal legal complexity regulatory authority. It is spread across 40-plus industries. If your new toaster doesn’t work and you need assistance, you seek the help of Fair Trading. But for property transactions, which always involve large sums of money and are by their very nature legally complex, Fair Trading is incapable of providing adequate consumer protection,” Mr McKibbin said.

Property, he said, is an industry that demands a dedicated, experienced regulatory authority able to work constructively and cooperatively with the industry.

“The establishment of a property services commissioner with industry knowledge and experience is essential from a consumer protection and the economy. We look forward to Parliament’s consideration and support for this critical reform,” he added.

4. Re-invest the revenue collected from property taxes back into the industry

The most recent stamp duty revenue collections show that the NSW government, in the five months to December 1 2020, pocketed $3.378 billion, which is $297 million more than for the corresponding period in 2019.

As such, Mr McKibbin judged, in the context of the COVID-19 economic fallout, the property industry is a “revenue-raising juggernaut”.

“With this enormous pool of additional funds, the capacity for government to support the industry that delivered the windfall is clear. Landlords who are providing support for tenants should be supported by government, as it clearly has the money,” he said.

5. Reform a ‘clunky planning system’ that constrains new supply 

“COVID-19 may alter the design of new housing projects, but the fundamental need to increase the number of homes built remains critical in metropolitan and regional locations,” said Mr McKibbin.

He called for the removal of tax disincentives for developers, discrepancies between state and local government priorities and delays in approvals, noting that they all contribute to unnecessary costs and constrain supply, while preventing the broader economic benefits of a healthy construction market from playing out.