Building boost not working - stamp duty cut is needed

By Michael Matusik, 9th November 2011

Many people are of the impression that the Queensland building boost will lift demand and help get more new development under way.

Well, for those who think that building grants or first home buyer boosts are the answer, you had best think again.  We are already half way through the six month Queensland “building blitz”, in which Queensland Labor was going to help facilitate up to 14,000 new housing starts across the state with its $10,000 Building Boost.

As at the 26 October, only 1,113 building boost applications have been received by the Queensland government and just 379  (yes 379) boosts have been approved – $3.8 million worth of support, costing an estimated $660,000 to advertise and promote the campaign.

Now, to be fair, the take-up is on the rise, but whether or not it is a hockey-stick style graph is debatable.   To quote Queensland Treasurer Andrew Fraser from Hansard on the 27th of last month – “I can advise the House that as of yesterday the number of applications is now 1,113.  In fact, the number approved is 379, but I want to make this point: as at 30 September, just a few weeks ago, it was 569.  In the week after that it jumped to 698.  In the week after that it jumped to 843 and in the week after that it jumped to 992.  So we do see the hockey stick approach to the graph at the moment.”

Yet, despite such reassurances, the 1,000-odd boost applications represent just a 4% increase on last year’s building approval across the state – which was just 27,500 starts – a ten-year low.  The real result – being 379 approvals – is a measly 1.3% lift in new dwelling activity.

Now maybe there are many more buyers waiting in the wings.  I hope so, but maybe, as we suggested, a 2% reduction in the asking price of a new property just doesn’t cut it.

The increase – as outlined by Fraser above – appears to be steady at around 150 new applications by per week.  So by the end of January – and assuming interest doesn’t sag during the Christmas holidays (a big ask!) – a total 3,000 applications would have been received.  Not a great result, given the 14,000 target, if you ask me.

Now we have some in the development industry calling for the boost to be extended.  Well I will let Albert Einstein reply on my behalf:  “The definition of stupidity is doing the same thing over and over again and expecting different results.”

Assuming that the $140 million set aside by the Queensland government for this six month blitz isn’t used up, and also assuming that Queensland Labor really want to help the new housing industry, how best should they spend this “windfall”?

The answer is simple – remove stamp duty from off-the-plan transactions.  The impact – as shown in both Victoria and more recently New South Wales – should be immediate and very positive.

We have just completed work on this for the Property Council of Australia - and whilst we are embargoed from releasing the key findings for the time being, we can say that removing stamp-duty from off-the-plan sales is likely to increase new housing starts across the state by between 10% and 15% per annum.  Yes, every year!

There is also local evidence that paying a buyer’s stamp duty works much better than the boost.  Some of the larger developers – who are supportive of the $10,000 handout – have been making sales because they have used this government largesse as cover as they offer – often quietly – to pay a buyer’s stamp duty.

Queensland needs a competitive advantage.  Our main competition is New South Wales and Victoria.  Dropping stamp duty for off-the-plan purchasers gets us back to a more level playing field.

It is a step in the right direction.

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