The housing sector in New South Wales is facing a significant downturn, with apartment constructions plummeting since the introduction of additional taxes in 2017.
Tim Reardon, the Chief Economist at the Housing Industry Association, highlights a stark 50% drop in unit commencements compared to previous years.
"We're witnessing apartment starts in NSW revert to levels last seen in 2012—a time when the state's population was 1 million less and migration only a third of what it is today," Reardon notes.
The Australian Bureau of Statistics recently released its building activity data for the December Quarter of 2023.
These figures provide a detailed look at the value of building work done and the number of dwellings commenced, completed, and currently under construction across the nation.
Reardon warns, "The more the government taxes homes, the fewer will be built, and the faster rents will rise."
He also points out the mismatch in governmental goals and outcomes:
"Despite the Australian government’s ambitious target of constructing 1.2 million new homes, making homes more expensive is a counterproductive policy that does little to slow NSW’s migration rates.
Instead, it exacerbates the inequity in the housing market, disproportionately affecting renters."
In 2023, only 23,653 multi-unit projects began construction in NSW, marking the continuation of a declining trend from the 21,652 commencements in 2022.
These figures represent the lowest levels since 2012 and are less than half of the 47,757 units started in 2016.
The downturn follows NSW’s decision to impose additional stamp duty and land tax surcharges on foreign investors starting in 2017.
"These measures triggered a retreat of foreign investment and a sharp decline in high-density residential construction—a trend not limited to NSW but evident in capital cities nationwide where similar taxes have been introduced," Reardon explains.
Foreign investors play a vital role in adding new housing stock, particularly high-density living solutions crucial during periods of rapid population growth.
Unfortunately, these investors are now penalized even when they leave their properties vacant, without the ability to move these assets abroad.
Reardon concludes, "Ramping up taxes on homebuilding will not curb NSW’s rapid population growth. With record population highs and acute housing shortages, the state desperately needs an increase in all types of housing, supported by both domestic and international investments."
