How the 2019 state and territory budgets stack up on housing, affordability and infrastructure

Budget season has come and gone and, with it, billions have been allocated to spend on housing and housing policies through the eight states and territories.

Government hesitation to directly increase housing supply has been criticised by housing experts, with Western Australia the only state taking any action despite its floundering property market.

University of NSW City Futures research fellow Chris Martin said this was the critical need that had to be addressed, rather than tinkering at the edges of policy.

“This is a question that state and territory governments get very excited about. Is there some other way of getting a ‘lower case a’ affordable housing supply that isn’t going to require governments to directly invest in it?” Dr Martin said. “I think the disappointing answer for governments is there is no other way other than governments directly making that investment themselves.”

Critics have also highlighted the need to reform the property tax system, and the ACT was the only government taking the steps to do so yet. It will phase out stamp duty in favour of a broad-based land tax, a darling of Australian economists.

The most pressing need was an increase of housing supply in the eastern states, particularly social or government housing, Dr Martin said, adding that no states or territories were effectively meeting the needs of their vulnerable residents.

“At the edges of it we’re starting to get a bit of growth and renewal,” he said. “It’s not enough to meet what colleagues of mine … have estimated as a quite substantial need for social and afford housing.”

The Property Council of Australia has slammed state and territory budgets for increased taxes, particularly land tax hikes and foreign investor fees.

“The latest round of state and territory budgets has seen a raft of ill-conceived tax hikes through changes to land tax and foreign investor surcharges,” Property Council chief executive Ken Morrison said.

“They have been buried deep in the budget papers, dressed up as measures to remove anomalies or address housing affordability but they are anything but.”

Mr Morrison was particularly critical of state budgets in Queensland, Victoria and South Australia.

“State budgets in Queensland, Victoria and SA have hit the property industry with arbitrary and poorly designed tax increases which will hurt investment and job creation, and risk undermining the current sentiment turnaround,” Mr Morrison said.

NSW

Unlike other states and territories, NSW is more conservative about future property price growth. This comes as the budget papers revealed the state has lost more than $10 billion in transfer duty revenue over the past three years.

In 2016-17, the market peak, stamp duty made up 31 per cent of total state government taxes, but by end of the 2018-19 financial year the budget papers predicted it would only be 21.6 per cent of total takings.

While stamp duty is forecast to grow by 5.2 per cent over the forward estimates to 2022-23, this is due to a rise in the number of transactions, and not because of house price growth.

The budget papers said “lower interest rates are expected to support a stabilisation in housing market conditions from late-2019”, however, the state government had predicted price growth would largely keep pace with inflation.

Dwelling construction in the state is also moderating after a record high last year. The budget papers forecast that approvals will fall further, “especially for apartments”. In the final quarter of 2018, commencements fell 22 per cent.

Despite Premier Gladys Berejiklian’s pre-state election promise to halve the number of people sleeping on the streets in NSW by 2025, the budget did not include extra funding for social and affordable housing.

The state is expected to receive $484 million from the federal government in 2019-20 for affordable housing, the budget papers show.

In infrastructure, the NSW government earmarked a $93 billion spend. More than half of this will go towards delivering more than 3500 road and rail projects. The government is relying on public investment to offset housing construction weakness.

Victoria

The biggest story out of the Victorian government’s budget was the $5.2 billion write-down on stamp duty revenue, with Treasurer Tim Pallas shoring up the hole in revenue with new taxes on luxury cars, among other things.

The government also wanted to discourage land banking by eliminating a land tax concession which allowed a land owner to claim an exemption for an empty block of land next to their home.

At the time Mr Pallas said it was a part of a strategy to encourage the densification of Melbourne’s middle ring.

Apartments also saw some love in the budget papers, with the government setting aside nearly $50 million to tackle flammable cladding and apartment standards more generally.

The Victorian Building Authority will get $46.4 million to inspect private buildings, and works to rectify public structures will continue.

Stamp duty concessions for first-home buyers will also continue, as will the solar panel installation rebate scheme. The government had also decided to extend the scheme to renters, at a cost of $135.1 million in total.

There would also be 1000 new public housing dwellings constructed over a year for a cost of $209 million, and another suite of improvements for the existing stock.

Money was set aside to develop priority precincts such as inner-city Parkville and Fishermans Bend and the outer suburb of Sunshine and contributions to help build infrastructure in new communities on the city fringe.

ACT

In the ACT, real estate taxes make up almost 50 per cent of all territory tax takings. Over 2018-19 the forecast revenue from real estate taxes is close to $1 billion. But this is not driven by stamp duty, which only makes up 13 per cent of total taxation revenue.

This is due to a centrepiece of the ACT government’s overall policy, a 20-year program to reform the territory’s tax system. Stamp duty is being phased out over this time and the shortfall will be made up  by increasing general rates.

As a result, rates and land taxes have risen significantly since the reforms were announced in 2012. Over the 2019-20 financial year, rates for units will increase, on average, by 11 per cent and for houses 7 per cent.

Chief Minister and Treasurer Andrew Barr is relying on a rebound to the property market, paired with continued population growth, to drive $300 million in surpluses over the forward estimates.

As announced in last year’s budget, first-home buyers in the ACT under an income threshold of $160,000 are not required to pay stamp duty on any property in the territory from July 1, 2019.

In 2019-20, stamp duty for all buyers is set to decrease, with the stamp duty payable on a $750,000 house to be $1300 less than the previous financial year.

The four-year indicative land release, part of the budget papers, slated the release of 15,600 dwellings over the next four years.

The ACT government has flagged a $600 million spend on public, community and affordable housing over the next five years. Most of this will be funded through the sale of older public housing dwellings as part of the ACT’s public housing renewal agenda.

Over 2019-20, 628 public, community and affordable housing dwellings will be released by the territory government.

Queensland

The Palaszczuk government has increased land tax, but only on companies and trusts which hold more than $5 million worth of land.

The increments are fairly small, up 0.25 cents to 2.25 cents for each dollar above $5 million and 0.25 cents to 2.75 cents for each dollar above $10 million, but it is expected to raise $238 million over four years.

Foreign-owned companies and trusts will also be slugged with a further surcharge of 2 per cent on their land tax, and the absentee rate will also jump from 1.5 per cent to 2 per cent.

This drew the ire of Mr Morrison. “If there was a gold medal for own goals it would go to Queensland,” he said. “Australian investors in commercial real estate are being treated as foreign investors – and taxed more – if foreign investment in the asset is above a certain threshold.”

The Sunshine State also avoided a big write-down in its stamp duty revenue, thanks to a much less volatile property market than NSW or Victoria, the budget papers outlined.

The state will continue its stamp duty concession for first-home buyers into the 2019-20 financial year.

Including grants, the Queensland government would spend $471.1 million on social housing across the state, including housing for Indigenous and Torres Strait Islander people.

Money will also be spent on urban renewal projects earmarked suburbs in Brisbane, and the state coffers will let go of some cash to upgrade infrastructure and support local jobs in regional areas.

South Australia

The SA government announced a $104.5 million housing stimulus package targeted at low-income earners, and at growing the construction industry – one of the biggest housing announcements this budget season.

As part of this, there will be a limited interest-free deposit gap loan of up to $10,000 for five years. It will form part of a new affordable housing fund and will enable low-income earners to cover upfront costs. The program is expected to help 200 buyers and is available for two years.

The stimulus package also includes $21.4 million for the South Australian Housing Authority to undertake a construction program over the next two financial years to build 90 homes, with a large portion to be sold as affordable housing.

The state government has introduced changes to land tax aggregation which will come into effect next July 2020.

The amount of land tax investors pay will shift to an owner’s interest in every piece of land rather than aggregating properties held in the same ownership structure.

Owners are required to pay land tax if total investments exceed $369,000. Currently, land tax is paid on only 22 per cent of taxable properties according to Deloitte.

The Property Council of South Australia criticised the changes, with state executive director Daniel Gannon calling them “a sharp sting in the tail for property owners and investors”.

Tasmania

House prices in Hobart have skyrocketed in recent years and the rental market has drastically tightened, making housing affordability in the state a key issue.

Over 2019-20, the Tasmanian state government has allocated $68 million toward increasing the supply of new and affordable housing.

First-home buyers who purchase a new property will also welcome the extension of the $20,000 first-home owner grant to June 30, 2020.

Other programs that have also been extended for another financial year include a duty concession of $7000 for first-home buyers on established properties and a duty concession of $7000 for pensioners downsizing.

In an attempt to curb the tight rental market in the wake of Tasmania’s tourist boom, land tax exemptions for landlords who convert their short-term accommodation to long-term rentals have been extended for another four years.

And in another, recent, win for the state’s vulnerable, Senator Jacqui Lambie managed to get an understanding from the Coalition in relation to the federal government forgiving the state’s $157 million in social housing debt in exchange for voting through the tax cuts last week.

She said it would free up money in the state’s housing budget to build more homes rather than repay debt.

Foreign investors will be slugged with higher taxes, with the foreign investor duty surcharge increasing to 7 per cent, up from 3 per cent. Taxes for farmland will also increase to 1.5 per cent, up from 0.5 per cent.

A land tax for foreign investors will also be developed during 2019-20.

Tasmanian Treasurer Peter Gutwein said the changes were “to ensure foreign investors pay a fair share of taxation and do not artificially drive up prices by reducing the supply of housing and primary production land”.

Northern Territory

The NT government has taken a strong stance on housing, hoping to improve the material conditions of its low socio-economic residents by helping them into their own home.

“Generational change” is on the agenda, with the territory government putting forward a $1.1 billion remote housing investment package which would alleviate overcrowding in existing homes, and spend $115.8 million on new homes among other initiatives. There was also $576.7 million set aside for refurbishing or building new homes more generally.

The territory has a $16.6 million home owner assistance program, which includes a grant of $20,000 to 600 people who build and live in a new home, a stamp duty concession for first-home buyers and those who haven’t recently owned a home in the NT, a first-home owner grant of $10,000 for new home buyers, a renovation grant of $10,000 for first-home buyers who don’t buy new and a $2000 household goods grant for first-home buyers.

Experts have said this may not be enough to entice migration to the top end, though.

Just a few large commercial transactions in the NT more than doubled the stamp duty revenue Treasury expected, up to $171.9 million this past financial year. It’s expected to drop to $76.5 million for the 2019-20 financial year.

Construction volumes will also remain weak, which may have encouraged the government to spend millions stimulating the sector.

Western Australia

Western Australia offers the most involved programs for housing in the country, including state-provided loans and government-built housing developments. Both programs will continue into 2019-20, with fresh funds allocated.

The treasury expects the property market to contract, and isn’t pinning hopes of an increase of stamp duty takings, which make up a small portion of the state’s revenue when compared to the eastern states.

The revenue from land tax fell $127 million and stamp duty fell $58 million in the past financial year.

The budget papers outline that an improving labour market, better-than-usual population growth and a weak construction sector could point to a turnaround in future, although the property market is weak and will be for a couple of years at the least.

The government will spend $4.2 billion in the next four years on infrastructure, and will allocate some more money to develop new homes around transport corridors. It wants to see 150,000 constructed around train stations and high frequency bus routes by 2031.