Stamp duty removal could raise prices

The policy has been described as an ”ill-conceived” idea that will do little to solve Sydney’s housing supply issues.

To obtain the full $22,490 saving offered in the budget, buyers must sign up before foundations have been laid.

If construction has already begun, they are eligible for a $5623 discount. And to be eligible, the building must be completed within two years of a buyer exchanging on the deal.

In the case of off-the-plan apartments, the chief economist with St George Bank, Justin Smirk, said the conditions and time constraints meant that only those apartments already with bank approval would benefit.

”It’s certainly going to create more demand, ” he said. ”But the problem is it takes a long time for the credit approvals to get through the [banking] system.”

Because of a shortage of supply, Mr Smirk believed prices were likely to rise for those apartments priced under $600,000 which had been approved but for which construction had not started.

He likened it to the first home owners’ grant. ”Generally when the government hands out free money, some of it ends up leaking into prices rather than improving affordability,” he said.

Then there is the often drawn-out sales and construction process.

David Milton, the managing director of agents CB Richard Ellis, which sells many off-the-plan projects, said the plan was ill-conceived because most large developments would not comply and the two-year time frame would be too tight.

”A lot of our projects have 20-month to two-year building periods,” Mr Milton said. ”And if there are wet-weather delays or if there are issues with your builder, it’s not going to work out.”

He said that in Sydney the scheme would have the most impact on new houses in the south-west and north-west. ”You can build a house in six months and some small developments such as three-storey walk-ups. But anything larger than that requires a significant presale time and considerable building period that won’t comply.”

The developer of the Breakfast Point project, Bryan Rose of the Rose Group, denied the move would lead to price rises.

”Maybe it will just help things along a bit. With the interest rate rises, that sector of the market had gone a bit quiet.”

He said the increased demand would speed up the sales and construction phases and that there had been a good response last weekend to advertising highlighting the ”free stamp duty”.

This week, the Bureau of Statistics released data revealing the second-worst March quarter for housing construction since records began 40 years ago.

NSW had 3572 new housing starts and Victoria 8843.