The Housing Industry Association (HIA) has raised concerns over the sharp decline in apartment construction in New South Wales (NSW) following the introduction of additional taxes in 2017.
HIA Chief Economist Tim Reardon highlighted that since 2017, the number of units commencing construction in NSW has fallen by 50 per cent, with apartment construction levels now at their lowest since 2012.
Reardon noted that in 2023, only 23,653 multi-units commenced construction in NSW, following just 21,652 in 2022.
These figures represent the two weakest years of apartment commencements since 2012, despite the state’s population growth and migration volumes being significantly higher than in 2012.
The decline in apartment construction has been attributed to the introduction of additional stamp duty and land tax surcharges on foreign investors in 2017.
These taxes, combined with other taxes, fees, and charges imposed on foreign investors by the Australian government, led to an exodus of foreign investors and a dramatic decline in higher-density home building.
Reardon said that foreign investors are a crucial component of building new housing in Australia, especially for higher-density living, which is important during periods of rapid migration.
He highlighted that Australian-based institutional investors are not filling the gap left by the withdrawal of overseas investors.
The impact of the decline in apartment construction is expected to be significant, particularly in Sydney and Melbourne, where rising interest rates are also contributing to higher costs for delivering new housing projects.
The NSW government is considering various measures to address the housing crisis, including a review of short-term rental accommodation and vacant properties, which may lead to the introduction of new taxes or levies.
The housing construction sector in NSW — particularly apartment construction — is facing a slowdown in 2024 due to rising interest rates and the burden of additional taxes.
The NSW government’s measures to address the housing crisis are expected to further increase the tax burden on apartment construction and investment properties, which could have long-term implications for the state’s housing market.
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