THE STATE GOVERNMENT HERALDED A NUMBER OF CHANGES FOR THE PROPERTY INDUSTRY IN THIS YEAR’S STATE BUDGET, THE MOST OBVIOUS BEING THE REMOVAL OF THE FIRST HOME OWNER GRANT FOR EXISTING HOUSING.
This change builds on last year’s adjustment which saw the $7000 grant varied to favour new dwellings. While the change will encourage the new construction required for our growing population, it also has resulted in considerable savings for the State Government. Government expenditure in 2012-13 for the FHOG was $133 million, the budget for 2014-15 is a 34 per cent reduction to $88 million.
FHOG was brought in to counter the impact of the introduction of the GST on the property market and has been used overtime to stimulate the economy through “boosts” funded by both the State and Federal budgets.
The UDIA Council in WA always been cautious about changes to the FHOG allocations as it can affect the market in unintended ways. On the surface, the transition to a focus on new homes is good but curtailing sales in the existing market can mean that current homeowners may find the transition to a new home more challenging.
Land tax was also adjusted in the budget. On the positive side, the top land-tax rate in the dollar remains unchanged after two years of rises, which means that new homebuyers will not have that additional cost passed through into the purchase price.
What has changed, however, is the middle-bracket land-tax rates which could affect the owners of investment properties who may seek to pass this through to tenants in the future. Over the forward estimates, land-tax receipts are expected to rise 78 per cent to $1.17billion.
There are a few other things that are noteworthy in the State Budget, including the continuing accumulation of the metropolitan regional improvement tax which is a fund that is used to facilitate key urban development projects such as the purchase of land for new roads or rail reserves ahead of construction. The apparent moratorium on expenditure sees funds close to half a billion dollars accumulating across the forward estimates.
If the MRIT is not proactively spent, there is likely to be an ongoing need for compulsory acquisition of land and compensation action thorough the courts, which can be both expensive for the government and stressful for landholders.