NSW Post-Election Wrap Up: What does a new Labor Government mean for property investors?

The importance of the property market to NSW

According to data released by the ABS, residential dwellings in NSW hold a total value of more than $3 trillion; and comprise 40% of Australia’s overall dwelling valuation. With such a significant stake, it’s no surprise that the two major parties are keen to have a positive impact on the property sector. After all, real estate continues to be an important economic driver, not just in NSW, but also throughout Australia.

For property investors, the results of this election are significant. So, what exactly does a new Labor Government mean for your investments?

The impact of stamp duty reform

First-time home buyers in NSW can now look forward to a direct tax cut thanks to the new government’s pledge to slash Stamp Duty. The plan will provide relief to 95% of first-home buyers and allow them to save more money for down payments or renovation expenses. Furthermore, the Property Council of Australia (PCA) has praised NSW Labor’s proposal to undertake a $30 million pilot build-to-rent project. The project aims to promote affordable and long-term housing for the state’s residents in need. The proposal is an excellent step towards a more sustainable and equitable housing market. Home buyers and the property sector can be hopeful that these proposals will be passed, and that they will benefit the market in the long run.

As confidence returns to the contracted real estate sector, investors will be keen to take advantage of opportunities. The new government will be looking to create and encourage investment activity, both from existing investors as well as first-time buyers.

The impact of stamp duty reform on property portfolios will be twofold. Firstly, it will provide relief to first-home buyers and bring in a new wave of buyers into the market, potentially leading to an increase in demand. According to the Australian Housing and Urban Research Institue (AHURI): “removing stamp duty will make it easier for people to buy a home, and also to sell their home.” This means that property investors can look forward to a more fluid market rife with opportunity.

The impact of land tax reform

Under the previous government’s reforms, home buyers could avoid having to pay stamp duty on the purchase of a new home if they opted into a land tax scheme. For buyers of properties worth up to $1.5 million, first home buyers could pay a yearly fee of $400 and 0.3% tax on the value of their land in exchange for sidestepping the usually exorbitant lump sum charge. However, the NSW Labor government plans to scrap this scheme entirely. With the new Premier going so far as to call the Liberals’ land tax a “forever tax” it’s clear that the scheme won’t be making a comeback.

We’ve crunched the numbers and can say that Labor’s stamp duty reforms will benefit first home buyers looking to purchase a property worth under $1 million.

For example, for an $850,000 unit, stamp duty under the Labor government will be significantly cheaper compared to the cost under the Liberal’s scheme. At only $10,023, the stamp duty cost under Labor is approximately 33% cheaper than it would have been under the Liberal government.

Labor’s scheme not only helps first home buyers wade through the financial hurdle of buying a property it also effectively helps to accelerate their journey towards property investment. By purchasing property now, they are investing in their future, as not only will they benefit both from capital gains, but also rental growth when it comes time to make the switch from first home buyer to landlord.

As property investors, it’s important to think long-term when considering the implications of the new Labor government. While stamp duty reform is designed to benefit those purchasing a property now, the long-term impact could be even more beneficial. With an increase in demand for housing along with potential rental growth, there may be further opportunities to capitalise on this new wave of real estate activity.

Ultimately, the changes introduced by the NSW Labor government should provide a much-needed boost to the property sector. With reform of both stamp duty and land tax, first home buyers will be able to take advantage of a more affordable market and investors will still have the opportunity to turn a profit.

HOUSES (assuming 50% land tax) Sydney Morning Herald, Feb 14th 2023

UNITS (assuming 15% land tax) Sydney Morning Herald, Feb 14th 2023

Final thoughts

It remains to be seen what other reforms the NSW Labor government has in store. With the housing industry so closely linked to the economic performance of the state, it’s likely that the new government will be looking to promote investment activity and encourage growth.

Relief for homeowners and investors is now here with the recent April interest rate pause by the RBA. It has been the fastest tightening cycle in Australia on record, with an increase of 350 basis points delivered in less than a year.

Investors should keep themselves apprised of further developments by taking advantage of up-to-date investor research and resources. Doing so will help investors make informed decisions about their property portfolios and ensure that their investment properties are primed for success.

At Ironfish, we believe that investing in property is a powerful long-term wealth creator and that with the right strategy in place, property investors can achieve their financial goals. We have been helping Australians from all walks of life to build property portfolios for more than 16 years, so if you are in the market for a new home or looking to expand your portfolio, get in touch with us today. Our expert property advisors are here to help you make the right decision for your future wealth.