Now that the NSW state election has been determined, it’s time for them to deliver all of the election promises, including the billions promised for large infrastructure projects. As property investors we know that large infrastructure projects can have a flow on effect and drive up property prices in certain areas, however the government faces an interesting challenge with a slowing of some property markets leading to less stamp duty revenue in the state budget.
Pre-election, the NSW government reduced forecasts of taxes collected from property sales by $393 million, due to less sales than previously forecast in the property market in NSW for this financial year, plus a further $354 million drop in revenue to 2022.
The good news for property investors is that if all other things remain as forecast, then there is still enough of a surplus in the state budget to deliver the billions of dollars of large infrastructure projects. Treasurer Dominic Perrottet said the government was still on track to deliver average surpluses of almost $1.3 billion over the next four years.
The NSW government receives around 10% of it’s state revenue from stamp duty so it obviously has a vested interested in ensuring the property market remains strong across NSW. However as one of the big drivers of property prices has cooled in many areas of NSW, FOMO – the fear of missing out, there is a new challenge for the government to help rebuild confidence across the state.
The banks now have their role to play in helping to restore the property market, after tightening their overall lending on housing for both would be homeowners and investors in a response to the Banking Royal Commission. They simply need to be delivering more responsible property lending – so investors and would be home owners can get on with securing the property they desire.
One final thought for the NSW government would be to find a way to not have to rely so heavily on revenue from stamp duty, as the recent down turn has shown. It can be a slippery slope when such a large amount of the State’s revenue is reliant on property transactions.